Hi Guys,
A few posts ago while comparing the poor class in the US with the middle class in Europe, MFOer Lewis Braham properly identified some of the shortfalls of quoting a single number to quantify a complex concept, like our well-being in terms of only economic factors. It’s certainly convenient to cite the GDP per person or income per person as an imperfect measure of our overarching well being. But, by themselves these measures fall short of the mark.
It’s analogous to measuring a baseball pitcher’s quality by simply relying on his won-lost record. A truer measure includes statistics like his allowable on-base percentage, his earned run average, his innings pitched, his hits per inning, and his home runs allowed per inning. These are his measured attributes. There are also his non-measured contributions like practice habits, like team spirit, and if he uses an acceptable deodorant.
There are numerous ways that economists measure the well-being and soundness of an economy in the spirit advocated by Mr. Braham. Here are two that include some elements mentioned: the Human Development Index (HDI) and the Index of Economic Freedom (EFI). Both of these indices present scorecards over time. Here are the Links to them:
http://hdr.undp.org/en/rethinking-work-for-human-developmenthttp://www.heritage.org/index/Table 1 in the HDI lists a national ranking that includes the elements that are embedded in the total measure. The HDI website includes a Multidimensional Poverty Index that is depressing. Sending funds to some of these countries does provide a measurable improvement, but that is not the case for other nations. Economists have not reached a consensus on why this is so. Corruption is a major leakage source.
The ECI is very interactive. A user can explore this measure for countries as a function of time, and as a function of the various components that contribute to the total Index. The website encourages country versus country comparisons. In the overall rankings, the US has been slipping downward lately. That’s not good.
These are just two samples of more comprehensive measures that economists have been developing. Each has its merits; each has its shortcomings. Measure of our happiness and/or well-being is far too complex to be completely captured by statistical measures alone. But they can yield some pathway guidance.
I hope you find these websites as informative and as much fun as I do.
Best Regards.
Comments
unicef.org/media/files/ChildPovertyReport.pdf
If I find a better source online, I'll post it.
OECD -- one of the sources of the data used in the post @MJG referenced above -- is paying considerable attention to factors not captured by GDP. Their "How's Life? 2015 Measuring Wellbeing" publication discusses some of those efforts. Briefly quoting from the report "One striking finding shown in this report is just how different the well-being outcomes can be in countries with very similar levels of GDP per capita. This underlines the importance of giving more attention to the many factors beyond GDP that shape people's life experiences."
The report considers 11 different dimensions of life between and within the OECD countries. @LewisBraham might be interested in Chapter 4 "How's Life For Children" that begins on page 141 of the full report.
Here is an interesting sampling from the information in the report. ( Sorry -- I had to take the whole page rather than just the chart). I was somewhat surprised the US didn't show up at the left hand end but was not surprised about where France appeared.
Here is a Short Summary.
Here is The Full Report.
Thank you for reading and responding to my post.
Like any good science, economics is a perpetual motion machine; economists are in a persistent learning mode. For the most part that’s a good thing although these professionals sometimes select a dark, dead-end pathway. That’s the way of good science.
The economics that I learned 5 decades ago from Paul Samuelson’s famous “Economics: An Introductory Analysis” textbook has evolved. I doubt that he devoted any space to happiness as a measure of economic success. I suppose I could check my supposition since I still own the book, but it’s not worth the effort.
Today, economists now attempt to measure economic prosperity in terms of controversial happiness and freedom measures. I say controversial since settled definitions of these parameters or their models do not exist. That too is the way of good science. Change happens.
Economic happiness is not a new concept. It tracks back to the days of Jeremy Bentham who died in 1832. “Bentham was the intellectual father of utilitarianism, the philosophy that can be summed up as the greatest happiness of the greatest number.”
I pulled this quote from Chapter 4 of Diane Coyle’s book “The Soulful Science” which I am currently reading. Her subtitle to the book is “What Economists Really Do and Why It Matters”. The book is rather up-to-date since it was published in 2010. In her book, Coyle stresses that happiness functions have been a hot research topic for the last several decades.
The singular and traditional GDP per capita measurement does not satisfactorily do the economic success job by itself. Also in Chapter 4, Doyle reproduces a graph that does show escalating happiness as a function of increasing GDP per capita. The curve asymptotes at the higher GDP levels. However, the data shows considerable scatter. Introducing other factors reduce that scatter. That’s the way of current economic science thinking.
A few years ago, I bought and read a copy of “Animal Spirits” that was written by George Akerlof and Robert Shillar. They too concluded that conventional economics does not satisfactorily explain a sufficient accumulation of economic data. They emphasize the need to incorporate human psychology factors into the modeling. They conclude that confidence, fairness, corruption, money illusion (inflation), and special story factors must be added to the basic economic parameters.
I was somewhat surprised by your complete dismissal of Heritage’s Index of Economic Freedom (EFI). Yes, Heritage is a bastion of conservative thinking, but the New York Times is currently a bulwark for progressive thinking. An open-mind is essential since neither outfit is always right or always wrong in their data interpretations. A diversity of interpretation and opinion offers more advantages than disadvantages for better informed decision making.
Conceptually I like the EFI formulation. It adds to the simple standalone economic model by annexing 10 factors that are grouped into 4 categories. These categories are (1) rule of law, (2) limited government, (3) regulatory efficiency, and (4) open markets. It’s tough to argue against these worthwhile goals.
Has Heritage distorted or corrupted the data sets? From a professional financial writers perspective (purely speculative on my part), it seems like risky business to summarily judge the work quality of any outfit simply because their political perspectives differ from yours. Almost everyone who survives does some good work and some bad work. The quality of that individual work piece must stand or fall on the quality, fullness and fairness of the research that supports it.
That’s just my opinion as a non-economist and a non-professional writer.
Thanks again for your reply.
Best Wishes.
Even if the data Heritage uses for its Economic Freedom Index is accurate, which I imagine it is, that is beside the point. It is the kind of data it is collecting and the definitions it's using to compile its uniquely libertarian vision of what "freedom" and happiness are that are the problem. Consider this: One of its primary criteria for economic freedom is "investment freedom." See here for all of its definitions: heritage.org/index/book/chapter-1 The problem with that is the vast majority of the world has little to no money to invest. Even in the U.S., the wealthiest nation in the world, 62% of Americans have less than $1,000 in their savings accounts: marketwatch.com/story/most-americans-have-less-than-1000-in-savings-2015-10-06 21% don't have a savings account at all. Most of those people could care less about investment freedom. They want to have enough food to eat, a roof over their head and access to affordable education and healthcare.
The difference I suspect between a left-wing vision of freedom and a right-wing one is that the left believes in a freedom from want while the right believes in a freedom to want. The left wants the government to step in and provide the basic needs of society even if that means higher taxes and regulations while the right wants no restrictions on entrepreneurial pursuits and personal accumulation of wealth. Somewhere between the two visions I suspect is a happy medium. But you will not find that happy medium at Heritage. I don't know where exactly it is to be found. I wish I did.
It seems to me The Heritage Foundation provides a useful service when it formulates its particular world view -- its vision -- in a way that can be analyzed and critiqued in a fairly objective way. Parts of the last two paragraphs of @LewisBraham 's October 25 comments above do just that. I happen to agree with much of what LewBraham writes in the parts of those paragraphs that comment on The Heritage Foundation's world view. But I do not see that he has demonstrated that the Heritage Foundation's act of presenting their world view in a way that can be analyzed and critiqued is a problem. And I do not see that he has demonstrated it is propaganda in any sinister or deceptive sense of the term.
Sorry for my delay in replying to your most recent fair and informative commentary. Weekends are busy times for me with multiple tennis, shopping, and church service commitments. These matters occupy a major fraction of my time, with financial and political matters consuming a tiny portion of that time. What’s true on my weekends is equally true during the entire week since I am mostly apolitical and offload my individual investment choices to mutual funds. I assign them the hard, detailed workload.
The primary purpose of my initial post was not to attack the New York Times, nor was it to defend the Heritage agenda. My only purpose in citing these institutions was to illustrate the variety of newer, more comprehensive economic modeling that incorporates a multitude of alternate factors to more fully measure economic progress. I do not advocate for either formulation.
I like the EFI formulation. It adds to the traditional economic model by using 10 measures that are grouped into 4 categories. These categories are (1) rule of law, (2) limited government, (3) regulatory efficiency, and (4) open markets. It’s tough to argue against these worthwhile goals.
I like the HDI formulation. It adds to the traditional economic model by expanding the measurement to incorporate 4 major factors. These factors are (1) Life Expectancy, (2) Schooling Years, (3) Target Schooling Years, and (4) Gross National Income per Capita. It’s tough to argue against these worthwhile goals.
Even given these very disparate rating units, both the EFI and the HDI have some significant commonality in their national rankings. Both Australia and Switzerland make the top 5 listings in the EFI and HDI systems. The USA ranks fifth in the HDI schema while it is ranked twelfth in the EFI system. I actually expected larger disparities.
I am an infrequent visitor to the NY Times paper. Living in the Los Angeles area, we take the LA Times and the Wall Street Journal on a daily basis. Until he passed away in 2009, I enjoyed William Safire’s conservative (my assessment) political NY Times articles. The current crop of Times contributors who might be considered conservative (like Ross Douthat) do not have the reputation or the clout that Safire commanded.
In my opinion, the NY Times in the last many years has moved more strongly to the Left. Evidence for that migration is contained in their Presidential endorsements through the ages.
Traveling backward in time, the Times sequentially endorsed Obama (D), Kerry (D), Gore (D), Clinton (D), Dukakis (D), Mondale (D), Carter (D), McGovern (D), Humphrey (D), Johnson, (D), Kennedy (D), and finally, Eisenhower (R) for the top political position. The last Republican presidential candidate that the Times endorsed was way back in 1956. That’s a sad history if the paper’s claim is fair neutrality. I anticipate an endorsement of HRC over any republican candidate in the next election.
You take a very strong negative position against the Heritage work product on MFO. Have you taken a similar position in your other published writings, like in your Barron’s contributions? Just because you disagree with an institution’s political agenda should not immediately consign their work to the junk-pile. Of course, any existing biases should be considered in the overall assessment process.
To close on a positive note, I truly enjoyed your insightful July article in Barron’s titled “In Search of a Universal Valuation Metric”, a really good work product. Thank you for it.
Best Wishes.
How do you figure? Not sure that's their claim, but you sound as confused about fair neutrality as about randomness and statistics. Would fair be 50-50 for the parties? Or what?
It's like the exaltation of false equivalence or something.
http://www.democracynow.org/
http://socialistparty-usa.net/
I read the material linked to the UN 2015 Human Development Report (2015.) Measuring such stuff is indeed complex. In this case, an intuitive sense of The Big Picture must be in play in order to understand it all, along with the hard data. I am certain that what goes into the recipe will, from the get-go, ENTIRELY depend on the sort of assumptions brought to the task. Leftie or Rightie, the point is to understand, not to grind an axe, of course. But it's supremely difficult to put those ever-present assumptions aside.
You asked me what I thought of other publications. Well, at the WSJ I would disagree with its editorial page, yet I have a great deal of respect for the reporting done for the rest of the paper on many subjects especially pertaining to investing and finance. The reason for that is that outside of opinion pieces relegated to the editorial page and the op-ed page written by non-journalists, newspapers are supposed to strive for objectivity in their reporting. This is why the ethical standards at every major publication require that journalists not accept gifts of any sort from their sources as it could sway their view.
It is also why the NYT motto is "All the News That's Fit To Print." There is an interesting history of that motto here: bbc.com/news/world-us-canada-16918787 But basically it refers to fairness, honesty and objectivity in reporting. Does the NYT achieve that goal? Of course not. No one is completely objective. But the important thing is that is its goal and it strives for it as do many publications outside their editorial page, including ones you're more likely to read like the WSJ.
By contrast, the Heritage Foundation's express goal as a think tank is to sway public opinion in a rightward libertarian direction. Moreover, it is financed by right-wing libertarian ideologues with that express goal. In some respects its entire organizational model is the direct opposite of honest journalism. Rather than avoiding financial gifts from political operatives because it could compromise its objectivity, as a non-profit it seeks them out to pay for its political efforts.
The interesting question regarding almost every major media outlet is how can they maintain their objectivity given their own business models? I often find it funny people accuse outlets like the NYT of being left-wing or even worse Marxist--the so-called "liberal media." How can they be that when their entire model depends on advertising from major corporations? While there is supposedly a Chinese wall between the ad business and the journalists at publications, inevitably it seeps into the culture. So how can an entity like the NYT that depends on big business to survive be left-wing and "anti-business?" The truth is it isn't, even on its moderately left editorial page. And the remainder of the paper is devoted to objective reporting, even if it is impossible to achieve completely.
A Chinese Wall is conceptually beautiful because of its simplicity. Practically, the experimental data demonstrate that it is nearly impossible to maintain such an imaginary, unproven concept. At first there are infrequent drips that grow into a steady stream that finally enlarges into a torrential flow. Almost all media outlets seem to now follow that real-world pattern. The New York Times is not an exception, but rather strengthens the rule.
One positive aspect of the Heritage work biases is that the consumer knows exactly what to expect. There are no hidden agendas as might be the case with less upfront organizations.
The numerous media sources do indeed influence the public’s overall perspective. Some research suggests that the general USA population on most matters is not very liberal (like 25%). However, the political voting demonstrates that this generally conservative population is bombarded and influenced by their information sources to more evenly vote for liberal candidates and policies. The media plays a key role in promoting that change.
Researchers have examined this issue and have attempted to measure it. A nice fair summary is given in a 2012 Freakonomics presentation. It is titled “How Biased is Your Media?”. The presentation includes access to a 35 minute radio podcast that is worthwhile because of the various folks interviewed. Here is the Link:
http://freakonomics.com/2012/02/16/how-biased-is-your-media/
One of the participants was Andrew Rosenthal, the editorial page editor at The NY Times. Obviously, he defended the Chinese Wall concept. Yet, even Rosenthal admitted that cracks do exist. The resultant neutrality erosion has magnified in recent times.
The Freakonomics article itself presents a Slant Scale from the studies of academics Groseclose and Milyo. The scale shows 20 media organizations with ratings that go from 0 ( completely conservative) to 100 (completely liberal). Most outlets score in the liberal direction. The NY Times rated 73.7. I really dislike 3 digit ratings since they suggest a precision that doesn’t truly exist.
Any measure of such a complex subject will be flawed. But it is one potential measure just like a counting of a newspaper’s Presidential preferred candidates list is.
The Freakonomics article provides links to the original research if your inclinations are to pursue this matter in more depth. It is a fascinating topic.
Biases need not be contained exclusively in the editorial section of a newspaper. Biases leek into all sections by the word choices made, by the omissions, by the selected references, by the storyline framing, and by the geography within the paper (above the fold-line or on page 20 rather than page 1). A top level bias can be easily enforced by newspaper owners when choosing the heads of the various departments.
Further research has discovered that the single best indicator of any biases in any media is the resultant customer base. Conformation bias is a driving force when selecting source material. The NY Times leadership is not just “moderately left” in its pages; it is “left” in other sections, although less militantly so. So are most other media outlets as the Groseclose and Milyo work product demonstrate.
Thank you for the friendly exchange. I learned something; I hope you did too.
Best Wishes.
http://mediamatters.org/research/2005/12/21/former-fellows-at-conservative-think-tanks-issu/134514 :
... the study employed a measure of "bias" so problematic that its findings are next to useless, and the authors -- both former fellows at conservative think tanks cited in the study to illustrate liberal bias -- seem unaware of the substantial scholarly work that exists on the topic.
Astoundingly weak work, not surprisingly. 0-100 right to left? Laughably simpleminded, and that for media with a range of staffers and opinions.
Even more compelling and with different substantiation:
http://www.brendan-nyhan.com/blog/2005/12/the_problems_wi.html
It's pretty funny, MJG, that you would use research from someone funded by the politically biased Heritage Foundation to prove that the media was biased and the Heritage Foundation upstanding and honest citizens.
Also, the research was so badly done that: "Upon seeing how their coding scheme categorized different groups, the authors might have reconsidered the wisdom of their operationalization of "bias." But apparently they did not. Their odd categorizations led to some startling conclusions, including the result stating that The Wall Street Journal has more "liberal bias" than any news outlet they surveyed."
The Wall Street Journal/Dow Jones was none too pleased with the study's methodology, publishing a letter:
"[T]he reader of this report has to travel all the way Table III on page 57 to discover that the researchers' "study" of the content of The Wall Street Journal covers exactly FOUR MONTHS in 2002, while the period examined for CBS News covers more than 12 years, and National Public Radio’s content is examined for more than 11 years. This huge analytical flaw results in an assessment based on comparative citings during vastly differing time periods, when the relative newsworthiness of various institutions could vary widely. Thus, Time magazine is “studied” for about two years, while U.S. News and World Report is examined for eight years. Indeed, the periods of time covered for the Journal, the Washington Post and the Washington Times are so brief that as to suggest that they were simply thrown into the mix as an afterthought. Yet the researchers provide those findings the same weight as all the others, without bothering to explain that in any meaningful way to the study’s readers."
But keep searching, MJG. I'm sure you'll find something online to confirm your beliefs. They don't call it the World Wide Web for nothing.
I sense a negative change to the friendliness status of this exchange.
I really do appreciate and take advantage of Internet resources. Thank goodness for DARPA’s support of the Eisenhower established ARPA network. A network that was originally conceived to encourage scientific academic information research exchange has morphed into the present priceless public resource. I participated in those useful exchanges during the system’s inception years.
Our discussions have surely diverged from the original purpose of my submittal. I merely wanted to focus on multidimensional alternate ways to measure economic progress. As I commented in an earlier post “The primary purpose of my initial post was not to attack the New York Times, nor was it to defend the Heritage agenda.”
You seem to have ignored that primary subject matter and now solely focus your comments on the NY Times and the Heritage organizations. That’s too bad since it dilutes the primary discussion, but that’s your choice.
I certainly agree that the Groseclose and Milyo study was imperfect. Again, to reference an earlier statement, I said “Any measure of such a complex subject will be flawed.” All research has its limitations and shortfalls. The Groseclose and Milyo work shares those deficits.
Groseclose and Milyo recognized many of those deficits and address some of them within their original report. Here is a Link to their 2004 paper:
http://www.sscnet.ucla.edu/polisci/faculty/groseclose/Media.Bias.8.htm
Note that in Table 3, the authors clearly identified the timeframes covered in their research of individual agencies. I agree that it would be more meaningful if the periods were identical. They were not. Note that the authors also tested and compared different formulations of their measurements. Comparisons of results are summarized in Tables A1 and A2 for these various formulations. All this is an honest presentation of their controversial work.
Since the work is controversial, it is expected that reviews will be both positive and negative. Those expectations were realized. Davidrmoran referenced one such negative review. That’s fair and a useful reference.
I am surprised that you quoted from that same reference without crediting the source. I suspect that the writer’s textbook would label this a cardinal sin. Your most recent posting contains 3 quoted passages without a single citation to their sources.
Your first undocumented quote references 3 conservative organizations who funded earlier work by the authors. If true, that certainly has the potential to bias the research. But the authors claim otherwise. In the acknowledgement section of their report they state: “We also owe gratitude to UCLA, University of Missouri, Stanford University, and the University of Chicago. These universities paid our salaries, funded our research assistants, and paid for services such as Lexis-Nexis, which were necessary for our data collection. No other organization or person helped to fund this research project.”
You get to choose who you trust. Groseclose, one of the 2004 authors has expanded on that work with a book titled “ Left Turn: How Liberal Media Bias Distorts the American Mind.” I have not read that book and do not plan to do so. A book with that title and subject material will surely attract a fair number of enemies and heated negative reviews.
Regardless, nasty comments need not be the order of the day. This is a long standing controversial topic that will not be resolved here.
Best Wishes.
Whatever. It is quality of work that is best for guiding one's choosing.
@MJG: Have taken the WSJ daily for many years, precisely because they do a good job of maintaining that wall. Sometimes their editorial pages make me wonder if commenters there even bother to read the news sections of their own paper.
But also to me using the Heritage Foundation data and assuming that it is one of the best measures of individual happiness and freedom and then referencing my posts personally in relation to it is rather insulting not just to me but to so many people who don't think investment freedom, an absence of trade barriers and no regulation of commercial interests measures any individual happiness or freedom other than that of a narrow swath of humanity owning commercial enterprises. Still, I could've been gentler in my responses. So that's on me.
Thank you for your considerate, courteous, and civil response. I did not seek or expect it; it is very kind on your part.
In general, I appreciate your participation in MFO discussions, and in particular I especially appreciate your reactions to my submittals.
I post from an optimistic perspective. An overwhelming fraction of my submittals are positive with a goal to help investors. That’s a primary reason why I choose a personal letter format when posting. My goal is to achieve a friend to friend exchange conducted in a respectful manner.
I’m sorry that my "I hope you learned something” comment offended you. That was certainly not its intent. I really do try to talk to readers, and not to talk down to readers. Your comments influenced some of my thinking on this matter; I was hoping that my comments made some impressions on your thinking.
I would be shocked if all my interpretations and opinions perfectly meshed with yours on all matters. Globally, that dovetailing of opinions would destroy a marketplace. I respect, and sometimes react, to any disagreements. That’s a good outcome.
Best Wishes.