Due to a furious debate in class on whether or not money increases happiness, we watched a debate on the issue.
In this debate Justin Wolfers and Bob Frank argued on whether or not money does correlate with happiness.
Justin Wolfers argued that an increase in absolute income did mean an increase in happiness. As an empirical economist, Wolfers used graphs and charts and examples to prove his point. First he disproved that Easterlin Paradox, which says that economic development is a zero sum gain so don't bother. He showed through countless graphs that happiness does increase with more money across countries and within countries. He showed that there is $15000 satiation law, a fake rule that claims people everything past $15000 is just extra money that does nothing to happiness.
Wolfers showed graphs that supported his view and disproved graphs that went against it. He showed new ways to measure happiness like numbers of time in a day you felt: enjoyment, depression, boredom, stress, pain, smiley, well rested, or ate good food. In all graphs more money increased the good attributes in a positive correlation.
Finally Wolfers talked about how happiness economics is not a radical idea. Politicians use it as their basis on all political platforms to get support. Politicians want to get more people money so they can be happy, healthy, and wise.
Frank claims that absolute income does matter but relative income matters more. We compare ourselves to our neighbors and that makes us happy. I am only happy if I am the only one with the mansion on the street. However, this posses a problem as people try to out do each other in an expenditure of arms races on goods. This causes everyone to build mansions making no one happy and creating a waste of resources.
Although Frank is a theorist and has no evidence to support his claims, Wolfers claims that he is right.
My questions about this debate were ruined by the questions the audience asked Wolfers and Frank at the end. However, Wolfers and Frank still didn't answer everything. I know that correlation doesn't always mean causation, there are other factors. Wolfers says there are other factors that correlation and causation aren't connected here. Does money mean happiness? If not what other factors are even in play here? Wolfers shows a graph that claims that as countries got richer they got happier. One graph, Belgium, got sadder. What happened here? What happened in Belgium of all places to make this outlier almost disprove Wolfers? This seems to show that not always does more money mean more happiness. Where are the graphs of Ebenezer Scrooge and grumpy old rich men? Finally where is all the evidence for Frank? Where is all the evidence that shows relative income creating happiness? This information shouldn't seem hard to get.
We watched this debate because Rizzo has tried to convince us over the past few weeks that we are richer than the past. Some students asked if we were happier also. The answer is yes, as this debate proves.
Saturday, October 1, 2011
Horrible Death Shows Source of Wealth and Depression
This might be the hardest blog I have ever had to write. I can hardly believe the words I am about to type in this note. Anyone who is squeamish should probably stop reading.
On September 28, 2011, someone in Baltimore used a bat to knock someone out. In Tampa Bay, literally 3 minutes later, the death was completed by another attack by a bat. The victim died not just by the hits of the baseball bats but also by choking.
The death of the 2011 Red Sox was an untimely one. They had the division title and were up by 9.5 games in the wildcard with a month to play. They did not make the playoffs.
The 2011 Red Sox show that money does NOT bring happiness. Investing millions of dollars in players like Crawford and Gonzales brought Sox Nation no happiness. In fact it brought depression, stress, and pain. The Red Sox prove that money and happiness don't always agree.
Not only do the Red Sox show this economic principle but also the source of wealth. The Red Sox affected many people's ability to produce and exchange. There will be millions of unmade T-shirts, pennants, and hats throughout Sox Nation. The Champion company will suffer. The champagne companies will always have the unused corks that never popped. They too shall suffer. The hundreds of workers at Fenway Park will be out of a job a month earlier than they anticipated. The ticket takers, hawkers, cooks, and even the players have no means of income now. Finally, the death of the Red Sox negatively affected the ability of Francona to produce and exchange as he is out of a job too.
Annoyingly the negatives that happened in Boston created a positive source of wealth in Tampa, but we're not gonna talk about that.
The 2011 Red Sox will be missed. A memorial service will be held as a duck boat is floated out on the Charles on fire tomorrow at noon, in typical viking style. Yankee fans will not be permitted to attend. Any donations to the 2011 Red Sox memorial fund can go to Terry Francona as he now needs a job for no good reason. Thanks Theo.
On September 28, 2011, someone in Baltimore used a bat to knock someone out. In Tampa Bay, literally 3 minutes later, the death was completed by another attack by a bat. The victim died not just by the hits of the baseball bats but also by choking.
The death of the 2011 Red Sox was an untimely one. They had the division title and were up by 9.5 games in the wildcard with a month to play. They did not make the playoffs.
The 2011 Red Sox show that money does NOT bring happiness. Investing millions of dollars in players like Crawford and Gonzales brought Sox Nation no happiness. In fact it brought depression, stress, and pain. The Red Sox prove that money and happiness don't always agree.
Not only do the Red Sox show this economic principle but also the source of wealth. The Red Sox affected many people's ability to produce and exchange. There will be millions of unmade T-shirts, pennants, and hats throughout Sox Nation. The Champion company will suffer. The champagne companies will always have the unused corks that never popped. They too shall suffer. The hundreds of workers at Fenway Park will be out of a job a month earlier than they anticipated. The ticket takers, hawkers, cooks, and even the players have no means of income now. Finally, the death of the Red Sox negatively affected the ability of Francona to produce and exchange as he is out of a job too.
Annoyingly the negatives that happened in Boston created a positive source of wealth in Tampa, but we're not gonna talk about that.
The 2011 Red Sox will be missed. A memorial service will be held as a duck boat is floated out on the Charles on fire tomorrow at noon, in typical viking style. Yankee fans will not be permitted to attend. Any donations to the 2011 Red Sox memorial fund can go to Terry Francona as he now needs a job for no good reason. Thanks Theo.
Class 13 -Adam Smith and the Source of Wealth
Today we looked at Adam Smith's "Wealth of Nations" (1776).
Smith said that the government should provide police and courts, a national defense, and regulation of public works. The government should not be involved in trade: laissez-faire! If the government allowed free and peaceful trade then good things would happen. The things that lead to success and not chaos are protected rights to property, a division of labor, a peaceful exchange of goods, and no special privilege granted by government.
The source of wealth is our ability to produce and exchange.
Smith said that through self-interest good things happen and we exchange goods. It is the invisible hand. People should be able to produce and buy whatever they want and there should be no restrictions into any jobs.
Spontaneous order, by Ferguson (1767), said that oder naturally happens in society. We have the instinct to improve our lives.
Smith worried that big interest groups were trying to mess with the little guy. As grain increased, the rich land owners got money people didn't buy from them with the expensive prices. England then made tariff laws and Corn Laws that prevented people from buying any corn that wasn't in England. This is the kind of special privilege that Smith feared.
Smith said that the government should provide police and courts, a national defense, and regulation of public works. The government should not be involved in trade: laissez-faire! If the government allowed free and peaceful trade then good things would happen. The things that lead to success and not chaos are protected rights to property, a division of labor, a peaceful exchange of goods, and no special privilege granted by government.
The source of wealth is our ability to produce and exchange.
Smith said that through self-interest good things happen and we exchange goods. It is the invisible hand. People should be able to produce and buy whatever they want and there should be no restrictions into any jobs.
Spontaneous order, by Ferguson (1767), said that oder naturally happens in society. We have the instinct to improve our lives.
Smith worried that big interest groups were trying to mess with the little guy. As grain increased, the rich land owners got money people didn't buy from them with the expensive prices. England then made tariff laws and Corn Laws that prevented people from buying any corn that wasn't in England. This is the kind of special privilege that Smith feared.
Class 12 - Mercantilism. Not so great
In this class we saw a diagram of mercantilism. Mercantilism is really just progressive corporatism. The diagram showed the circular flow of the system. The factor markets and goods markets had individuals in them. They sent their stuff to the firms for payments. The firms then sold other stuff to the individuals for payments. Everything is interconnected between the transfer of stuff and money. An equation of income expenditures was Income = (consumer goods - taxes) + Investments + government + net exports.
Mercantilism put huge restraints on individuals. Things could only be made certain ways. There was a limit in production amounts, wages, trade options. There were several government monopolies. The theories of mercantilism said 1. all trade is "zero sum" and someone gets rich while someone else gets poor 2. money is the source of wealth and 3. the king should manage trade aggressively by restricting imports and promoting exports.
The source of wealth was discussed by French Physiocrats, Mercantilists, and Scottish Moral Philosophers. The physiocrats under Quesnay said that through agriculture you get rich and that is the source of economic growth. We were the change between consumers and producers. The mercantilists said that the source of wealth is the king's bank account or the amount of gold in the country. They looked for a positive trade balance. The moral philosophers thought the source of wealth was commerce as people will act virtuously and with morals.
David Hume rejected mercantilism and that economics stands alone externally and internally. Mercantilism misses the price specie flow mechanism and the law of one price. This said that prices rise and fall until they're back where they started.
Mercantilism put huge restraints on individuals. Things could only be made certain ways. There was a limit in production amounts, wages, trade options. There were several government monopolies. The theories of mercantilism said 1. all trade is "zero sum" and someone gets rich while someone else gets poor 2. money is the source of wealth and 3. the king should manage trade aggressively by restricting imports and promoting exports.
The source of wealth was discussed by French Physiocrats, Mercantilists, and Scottish Moral Philosophers. The physiocrats under Quesnay said that through agriculture you get rich and that is the source of economic growth. We were the change between consumers and producers. The mercantilists said that the source of wealth is the king's bank account or the amount of gold in the country. They looked for a positive trade balance. The moral philosophers thought the source of wealth was commerce as people will act virtuously and with morals.
David Hume rejected mercantilism and that economics stands alone externally and internally. Mercantilism misses the price specie flow mechanism and the law of one price. This said that prices rise and fall until they're back where they started.
Class 11 - I Want Better Quality Kids
Today we talked about population theory. We saw that there are two theories: classical and modern. The classical theory claims that when people get richer they have more kids. In the modern theory, when people get richer they save the money to better their lives and the lives of the kids. The change from classical theory to modern theory was the change from a need for child quantity to a need for child quality.
The coordination trap says that poor families needed more kids under the classical theory because they needed more workers in the fields. There was no coordination or progress and industry never came. The rich on the other hand sent their kids to school because they had workers and industry.
There is a cycle of technology. As technology improved, so did productivity. Then there are higher wages and then people want to go to school to earn these higher wages. Because people go to school there is more technology. This cycle shows how we will never lose our jobs to robots.
The peer effect says when people move around, everyone improves. The Industrial Rev. happened because the tinkerers had time to tinker and they improved. The products were not what started the revolution.
Smith's "Wealth of Nations" talked about institutions - the most important determinant of economic growth. This said to respect the rule of law and to tolerance. With this entrepreneur created whatever they wanted. The change in climate led to the revolution as the bourgeoisie gained respect.
The coordination trap says that poor families needed more kids under the classical theory because they needed more workers in the fields. There was no coordination or progress and industry never came. The rich on the other hand sent their kids to school because they had workers and industry.
There is a cycle of technology. As technology improved, so did productivity. Then there are higher wages and then people want to go to school to earn these higher wages. Because people go to school there is more technology. This cycle shows how we will never lose our jobs to robots.
The peer effect says when people move around, everyone improves. The Industrial Rev. happened because the tinkerers had time to tinker and they improved. The products were not what started the revolution.
Smith's "Wealth of Nations" talked about institutions - the most important determinant of economic growth. This said to respect the rule of law and to tolerance. With this entrepreneur created whatever they wanted. The change in climate led to the revolution as the bourgeoisie gained respect.
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