There's a fundamental issue with this report. It doesn't provide insight into why these indicators for well-being are important.
For example, Exhibit 2 in the linked report [1] shows 44 indicators that make up well-being. These range from inflation volatility to carbon dioxide intensity.
Now I have no doubt that those indicators may tell you something about society, but how do we know these indicators tell you about well-being?
Put in another way, how can I tell that these indicators should be included at the level importance this report gives them?
Kudos to the report authors for number crunching and making nice charts though.
> Put in another way, how can I tell that these indicators should be included at the level importance this report gives them?
Absolutely. Also:
* What is the relative importance of the indicators? How much GDP growth is worth a crackdown on the freedom of the press?
* How sure are we that we can even assign a numerical value to these things? How do we compare American corruption to Mexican corruption, which clearly present differently? Can we even say one is worse than the other, let alone 23.2% worse?
Corruption is generally measured as people's perception of corruption, which should help to normalize something that is culturally nebulous. Secondly if corruption becomes really bad it'll bleed into other numbers like GDP growth (see China), pollution (oil leaks and spills in Nigeria) and even life expectancy (recent crisis in Venezuela).
It gets you in the ballpark though, which is the best you can hope for with these types of analyses. Better to consider the indicators that were left out vs. included, than to nitpick about the individual weightings.
So, I looked at the report too, and I am convinced that many of indicators are somewhat sensible. Life expectancy at birth? Access to a water source? Gini Index? Level of civil activism? Intergroup cohesion?
I think humanrebar's point is a bit more valid of a point, how does one either weigh or quantify such measures, which I'd guess they probably do address (I don't have time to read it through right now). The choice of things to look at I have less qualms with.
"There's a fundamental issue with this report. It doesn't provide insight into why these indicators for well-being are important."
Not really, it's getting tiring to read these sort of comments on HN. If you actually go and read on the page that outlines what SEDA is, you'll find their justifications for how they choose to measure well-being.
My take is these are justifications not backed up by insights.
Here's a couple of excerpts from your link we can discuss.
>Income is important because it measures the ability of a nation’s population to purchase necessities as well as discretionary goods and services
>Environmental stewardship helps ensure that citizens have access to clean water and are not subject to unhealthy pollution levels or the adverse climate effects caused by unchecked carbon emissions. In addition, the preservation of plants and animals and their habitats is increasingly recognized as an important objective.
Sure to us in the US (or other developed countries) these both sound reasonable.
But let's say you live in rural Lesotho or other rural village in a developing country.
Does marginal income increase
your well-being? Maybe, maybe not. We don't know if the marginal dollar is enough to raise well-being nor if it is being spent on investments or items which increase well-being. e.g. does the marginsl dollar on average get spent on vices? Is this good or bad?
What if you're urban India? Does increasing environmental stewardship increase well-being? What if it's at the expense of increased costs for farmers which increases food costs? Is this a net negative or positive for well-being?
Furthermore, how do we define well-being? There needs to be some baselone in the study which sets the level for 'good' well-being vs bad 'well-being'.
My frustration comes from setting up an NGO to tackle some of these issues. We met and were advised by similar social enterprise groups that put forth pillars of livelihood or well-being without ever checking back with humans and what real people need. It's easy to say "this sounds reasonable" and implement solutions based on these assumptions. It's tougher to be boots on the ground and solve real problems.
I can see your concern, but I think your overthinking it. It's a high level report. We can argue how important any one is for well-being, but that isn't necessarily the point. The point is, in this case, that if you have a certain amount of growth and multiple of these areas get better then you're converting growth to well-being better than a country in which fewer of these areas get better. Which I, while it doesn't tell the whole story, wouldn't consider controversial.
Here's something interesting: The US has the second highest corporate tax rates of all OECD countries, whereas most EU countries have much higher personal income taxes.
Now this might be misleading. My roommate is a corporate/tax law student and he was dumbfounded by this. He pointed out that the effective tax rate might be quite different.
That's the whole point. One metric to measure how much the government takes. Otherwise it's quite difficult to pick through the various methods of taxation.
Denmark also has a less regulated financial system than the US. The idea of the US, when compared to Europe as representing extreme laissez-faire capitalism, is not an accurate reflection of reality. They're all variants of state-regulated semi-free markets.
Tax rates are pretty meaningless to compare because of differences in credits, deductions, and methods of calculating tax base. And, for that matter, different sets of taxes affecting the same entity with different names.
In the US especially (and also a large extent in Europe) companies bribe/lobby themselves to favorable laws, so in many cases the effective tax-rate is much lower.
For example, Apple pays an effective tax-rate around 15% (US 'official' corporate tax is at 35%).
Apart from tax-payers loosing out on revenue it also distorts competition, since smaller firms cannot lobby and evade taxes to the extent larger firms can, leading to lower ROE and thus less investment.
While your points are true, the third does not follow from the first two. Favored industries do get tax breaks, though more for garnering targeted votes than lobbying. That's why Exxon pays 15% and WalMart pays 30%.
The tech industry, including Apple, largely does not benefit from targeted tax breaks. They lay low taxes because they deal in IP and have international operations, which allows them to easily shift taxes to lower-tax jurisdictions. It's easy to look at Wal-Mart's supply chain, which involves widgets, and see where costs were incurred and profits made. Much less so with Apple.
And those tax rules tech companies take advantage of are not loopholes or tax breaks. They're reasonable and sometimes intrinsically necessary tax rules that can be arbitraged in an international system (often with the explicit aid of legislatures in countries like Ireland).
Another one is to use the money parked abroad (i.e. not yet taxed) to buy expensive things and then write down most of the asset a year or two later.
---
"[they] are not loopholes or tax breaks. They're reasonable and sometimes
intrinsically necessary tax rules that can be arbitraged in an
international system"
Sounds exactly like tax-evasion to me! :)
---
Also, to be clear, I love capitalism and happen to think that 35% corporate tax is a bit too high (~25 feels reasonable).
What I don't like is larger firms having lower rates (unfair) and many countries loosing out on tax revenue with a few 'tax havens' getting loads of tax-revenue while producing nothing of value -- Luxembourg, Lichtenstein, British Virgin Islands, Ireland (to some extent) etc.
No. That's tax avoidance. Evasion is when you actually don't pay taxes that you legally owe, e.g. by hiding your income.
There is some idea that people and companies have a moral duty not to organise their affairs in a tax efficient way. But the laws they lobby for are just what create the distortions.
I think it's besides the point to discuss the specific definition of avoidance/evasion/planning/etc.
Also, many countries has a law that basically says that anything a company does to reduce their amount of taxes without serving a business purpose is illegal. In other words, if don't have a very good reason for why your taxes are paid in the Bahamas when 99% of your sales is outside the Bahamas, it won't fly in court.
I think the responsibility is with governments (though I do think many companies act immorally) to provide a fair, simple tax-system and to prohibit and persecute tax evasion/avoidance/etc.
> And those tax rules tech companies take advantage of are not loopholes or tax breaks.
"The regulations, however, had significant unintended consequences and opened the door to a host of tax avoidance schemes. Under Subpart F, passive income paid from one separate legal entity to another separate legal entity – even if they were both within the same corporate structure – was immediately taxable. However, with the implementation of the check-the-box regulations a U.S. MNC could set up a CFC subsidiary in a tax haven and direct it to receive passive income such as interest, dividend, or royalty payments from a lower tiered related CFC without incurring Subpart F income. [...] On March 26, 1998, Treasury and IRS then proposed regulations to close the loophole opened by the check-the-box rule."
That's true, but the bigger issue with corporate taxes in the US is that large multinationals funnel their income to low tax countries. And that's [partially driven by the very high rate.
I didn't know that. I always thought it very unfair that individuals have a much higher tax percentage to pay than corporations, and somehow I tought the US wasn't like that.
Why is that unfair? Perhaps the fairest system would
remove corporate taxes entirely and recoup it from income tax increases. That way rich shareholders will pay at the maximum tax rate, while ordinary savers who's mutual fund happens to invest in a corportation pay at a lower rate.
There could be practical reasons against such a scheme, Maybe it would be easier to game than the current system. But the point is, fairness consists in distributing the tax burden among people -- abstractions like "corporation" are neither here nor there.
For me, the red flags that this is a BS study are:
1) They're comparing countries like India and, say, Denmark (Source: Indian here). In India, about 60% of the population shits on the streets, and injured (lame) cows and dogs hobble around in middle of the roads in cities (where they get food and water from is a mystery). In India there are hundreds of cities with over a million people in them, and with not a single public toilet maintained by the city government. I have a cousin who is a lawyer in a big, supposedly "modern" city (Gurgaon). I once went to the courthouse with him. There was 2 inches of standing water every where in the building. You simply cannot compare India and, say, Denmark.
2) The reference point effect. Kahneman talks about this extensively. If the local police are constantly harassing me so that they can be bribed (India), and one less policeman harasses me to be bribed, my well-being is considerably more "bolstered" than if I'm living in, say, Denmark, and instead of 0% sustainable electricity being fed into my home, I now have 10% sustainable electricity being fed into my home.
3) Boston Consulting is going to fund studies (and shape outcomes) that make bureaucrats in rich countries go, "hmmm... maybe we should hire them to 'bolster' our well-being".
Sorry for being so cynical. But consultants are not exactly neutral parties in my opinion.
Interesting to read the actual report (edit: actually BCG's summary of the report) and compare it with the Bloomberg article. BCG's using this report to make the case that private sector involvement, especially from financial services, leads to high social benefit. But this must not be a linear relationship, or it can be strongly offset by other factors. Otherwise the U.S. -- with all its private enterprise and as home to some of the world's biggest/most influential banks -- should be top of the list. But per the article:
>The United States' ability to convert both wealth and growth into well-being is below par globally, while Germany manages to perform above par on both fronts.
At a certain point, in order to increase well-being, you will have to do things that could limit growth in a country. For instance, I believe that the Nordic countries are at a point, where the best way to improve well-being (in terms of health and quality of life) would be to reduce the work week to 30 hours.
Sadly that not really consistent with a desire for increase customer spending and financial growth.
After a certain level of "well-being" the cost of reaching the next level becomes prohibited and the measure of success hard to judge.
I wonder how much impact changing employment laws to use a shorter work week would really have on productivity.
I bet the US could change regulations around the 40 hour work week to a 36 hour work week with almost no impact on productivity. Per hour productivity might even go up (if the amount of non productive hours dropped).
Of course jobs with a more direct relationship between time spent and productivity would see some reduction in the output of their full time workforce, but they could make this up with a modest amount of overtime.
"The greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects; In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings."
http://www.boston.com/news/globe/ideas/articles/2007/08/05/t...
And it's sad that acknowledging this reality is something you can't do in the workplace or in polite company. If we're to get ahead in life, we have to say, through gritted teeth, "diversity is our strength".
"The SEDA, or Sustainable Economic Development Assessment ranks more than 160 countries across 10 areas including economic stability, health, governance and environment."
A country's SEDA score could easily go up or down drastically based on the weighting of those 10 different areas.
The purpose of GDP is to give a precise measure of our intuitive notion of "prosperity". This is an inherently flawed goal. GDP roughly corresponds with what we want to measure -- countries with higher GDP usually match those we intuitively regard as more prosperous. But, having citizens buy foreign holidays and plasma screen TVs with credit card debt boosts GDP. New technology which cuts the cost of some good can lower GDP. It's a flawed measure.
As with "Gross National Happiness", SEDA strikes me as an attempt to find an alternative to GDP which measures "what we really want to get at". The thing is, "happiness" is both personal and complicated.
I'm sure the society depicted in Brave New World would have both a high GDP and high SEDA score but it's not what I'd regard as bolstering "well-being". Conversely, I'd be pretty happy living in an Anathem-type society (monasteries filled with scientists and philosophers), even though they lived in material poverty.
Internet has played an important role in developing countries. The western/rich countries may have already reached a kind of plateau of streamlining of services facilitated by Internet, but for the large part of developing world, Internet has started to emerge as a major force only in the last decade or so.
E-commerce, easy/free availability to information/knowledge etc .. are all changing the social and economic landscape in developing countries rapidly and this change is going to continue where there is even a partial political will for it do so.
When GPD growth slows, the only way to net personal gain is through another's loss. If you assume well being does have some sort of financial price tag tied to it, then this makes sense that someone's well being would go down as another's goes up, as the net for the whole economy doesn't change.
The zero sum delusion assumes someone only gets rich by taking from another. The delusion is that this is the ONLY way to generate wealth. When you create new markets and new products, the economy grows and everyone is better off. When the economy doesn't grow, the only way one person is better off is someone else is less well off. These are two different cases.
I doubt very much that catching up is easier to do. If it was so easy we wouldn't see huge differences between different countries.
There are a lot of self reenforcing factors that keep countries back for a long time. Bad governance, corruption, violence, bad investment decisions, inefficient legal systems, debt, terrible infrastructure, bad health and education, smart people leaving the country, etc. It all feeds on itself and its very difficult for a country to escape that spiral.
For example, Exhibit 2 in the linked report [1] shows 44 indicators that make up well-being. These range from inflation volatility to carbon dioxide intensity.
Now I have no doubt that those indicators may tell you something about society, but how do we know these indicators tell you about well-being?
Put in another way, how can I tell that these indicators should be included at the level importance this report gives them?
Kudos to the report authors for number crunching and making nice charts though.
[1] (Warning: pdf) https://www.bcgperspectives.com/Images/BCG-The-Private-Secto...