Opinion

Edward Hadas

Obesity and the unhealthy economy

Edward Hadas
Mar 13, 2013 15:11 UTC

Obesity is a matter of free choice – no one forces people to get fat – but few people are happy with the result. In the last few decades, the freedom to eat has too often turned into slavery to the immoderate desire for more.

In the United States, the world leader in obesity, the trend toward higher body weights began more than a century ago. Researchers John Komlos and Marek Brabec show that the average body mass, weight adjusted for height, has moved upward fairly steadily – from too low for optimal health right through optimal to the current too high level. Most visibly, and alarmingly, the gap between the heaviest 30 percent and the rest has widened significantly in the last few decades. There is no end in sight.

The problem of obesity is an adverse side effect of one of the greatest economic liberations ever, the freedom from want of food. Until shortly before 1900, food shortages were nearly always and everywhere a lively possibility, and all too often a grim reality. Now, although inadequate nutrition still blights the lives of more than a billion people in the world, residents of developed economies enjoy food in excess.

This change from shortage to surplus should have provoked a moral analysis. In the old days, the ethics of abundance were almost irrelevant. Moralists chastised gluttony, but for most people necessity imposed moderation, in practice if not in desire. And farmers did not need a course in philosophy to decide to produce as much as they could.

In the new era, physical need is no longer a constraint and unhealthy eating is now an everyday reality. The threat must be countered by individuals, food producers – no longer primarily farmers, but companies with processing plants and factories – and governments. All have failed to live up to the challenge. The result is that food is often not used as it should be, to provide the benefits and pleasures of healthy eating.

Salvation through work

Edward Hadas
Feb 27, 2013 14:58 UTC

“It has been computed by some political arithmetician that if every man and woman would work for four hours each day on something useful, that labour would produce sufficient to procure all the necessaries and comforts of life … and the rest of the 24 hours might be leisure and happiness.”

When Benjamin Franklin wrote that in 1790, the American thinker was a few centuries ahead of his time. But the modern economy is so productive that everyone would have far more “comforts” than were available in Franklin’s day, even if the standard working week were shrunk from 40 to 20 hours. The four-hour day, though, isn’t on the horizon. Benjamin Kline Hunnicutt, a professor of Leisure Studies at the University of Iowa, explains why not in a fascinating new book, “Free Time, The Forgotten American Dream”.

For more than a century, labour activists continually demanded – and were granted – shorter working hours. By the 1930s, futurologists were sure that the trend would continue. Workers wanted more leisure time, and, thanks to ever more efficient machines, they could have it, while still enjoying steady improvements in the material standard of living.

Greed, justice and deception

Edward Hadas
Dec 19, 2012 12:15 UTC

Greed contributes to all the economic and financial woes of prosperous societies. The United States and other rich countries produce much more than is needed to support all of their people in comfort, so if desires were all truly modest, there would be few problems. Greed encourages people to decide that their own share is too small. Greed influences the popular desire for GDP growth (more, faster), financial gains (higher house prices as a human right) and total economic security (guaranteed pension, come what may). Voters’ greed encourages governments to spend more and tax less.

During the boom years, politicians and economists consistently underestimated greed’s disruptive power. While few endorsed the extremist view that greed is actually good, even fewer acted as if it were dangerous. The rhetoric changed during the crisis. It has become fashionable to add “greedy” to the description of any unpopular group – bankers, highly paid executives, rich people in general, welfare cheats.

In theory, the entry of greed into the public discourse ought to be helpful. If those subject to immoderate desire could be identified with certainty, then society might take up arms against them. While we might never win the battle, we could at least hope to shame and restrain the malefactors.

Candidates as consumer products

Edward Hadas
Nov 21, 2012 15:06 UTC

Barack Obama did not win the election because more Americans thought he would be a better president than Mitt Romney. More Americans voted for the incumbent than for the challenger, but it is Obama’s superior campaign organisation, and not his personal appeal, that deserves most of the credit. In particular, his product managers were better than Romney’s at using the technique of “data mining”.

The technique, pioneered by supermarkets, is conceptually simple: measure everything and tweak as necessary. In practice, it is a delicate affair. Suppose a popular soft drink has 4 percent higher sales when it is stocked next to a salty snack than when healthier raisins are its shelf-neighbour. Should shelf locations be swapped? There are many variables: the effect on sales of salty snacks and raisins, the profit margins of the different products, and customers’ sensitivity to any price changes. Most of the effects are tiny, but the study of millions of data, including a large number of computer simulations, can increase a retailer’s revenue and profit by a few percent.

In elections, data mining can bring votes to candidates and can increase the supply of contributions which pay for vote-gaining advertising. The work is detailed. Time magazine reports that the Obama campaign carefully tested how much more likely undecided voters in each close state were to yield to the blandishments of local rather than to out-of-state volunteers. The superiority in detailed computer work – “We ran the election 66,000 times every night”, as one expert explained to Time – probably gave Obama a few more percentage points of votes than Romney. It was the margin of victory.

The angel is in the detail

Edward Hadas
Nov 14, 2012 15:47 UTC

Barack Obama will not solve America’s most profound economic problems. That is not a partisan political statement about the newly re-elected president. Had Mitt Romney won last week’s contest, he also would not have been able to reduce unemployment, improve the trade balance, rebuild U.S. manufacturing excellence and strengthen the middle class. The fixing of the American economy is just not a one-man or one-woman job.

The Federal Reserve is trying to help with one of those problems, unemployment, but the central bank does not possess the refined tools needed to address this complex issue. Indeed, bold decisions made by the highest authorities cannot resolve any of the developed world’s greatest economic problems. The devil – and the angel – is in the innumerable details.

Of course, there are times when big policy decisions change the course of economic history, as when the new governments of formerly communist countries abandoned central planning, or when the U.S. government rescued its banking system during the last financial crisis. Less dramatically, changes in government deficits and central bank policies on interest rates can moderate fluctuations in the economy by compensating, to some extent, for hyperactivity or sluggishness.

Unrealistic Nobel economics

Edward Hadas
Oct 24, 2012 12:34 UTC

Stable pairwise matching won Lloyd Shapley and Alvin Roth the Nobel prize for economics. It is an idea that is simple, slightly illuminating for economists, occasionally useful for everyone – and profoundly misleading.

The matches in question are between members of two groups, for example potential husbands and potential wives, or medical school graduates and hospitals that might employ them. The “stable” is defined narrowly: the pairing off is stable as long as no individual can find a way to improve his or her situation by trading partners. What counts as “improvement”? The game theory of Shapley and Roth does not really address that question.

The simple idea, demonstrated by Shapley a half century ago, is that under certain conditions a methodical process of elimination – many rounds of tentative pairings – leads to stability. Take a pool of equal numbers of would-be brides and grooms. The men keep on proposing to their favoured women. At first, only the irresistible men garner acceptances from the most appealing women. Gradually, though, each less attractive man will win the favour of some less attractive woman, who accepts the sad reality that she cannot do any better. At the end, while many people may wish they had a different spouse, no one will be able to arrange a trade. Any alternative pairing will be less desirable than the current one to one side or the other. That is exactly game theory stability.

Welcome the U.S. relative decline

Edward Hadas
Oct 10, 2012 13:53 UTC

Whoever wins the U.S. presidential election will preside over a relative decline in the country’s global economic position. He should, but probably will not, accept the inevitable.

There was a time when almost everything about the American economy set the world standard. In 1960, The United States was the world’s largest market. It had by far the most developed infrastructure, easily the best educational system and undoubtedly the most business-friendly government. It was the source of most innovations, from safe highways and comfortable suburban houses to computers and advanced pharmaceuticals.

Those days are long gone. The creation of the European Union has left the U.S. market in second place. Overall, the infrastructure in Europe and Japan is at least as advanced. The United States is still the global leader in many areas of industry, education and government, but it has fallen behind in some, and the gaps have narrowed in all.

The EAST cure for unemployment

Edward Hadas
Oct 3, 2012 13:52 UTC

The winner of the presidential election should do something about U.S. unemployment. The current rate of 8 percent is high by America’s historical standards, and that measure does not capture the gravity of the problem – too many people have spent too long out of work or have decided to leave the workforce because jobs are too hard to find. European leaders face an even greater challenge. The EU unemployment rate is 10.4 percent, and during the last decade it has been below 7 percent for only half a year.

What is to be done? Neither Mitt Romney nor Barack Obama has a clear plan. The Federal Reserve has an idea, but it is hard to see how $40 billion a month of newly printed money will actually help create jobs. I have an alternative approach: EAST. It is both an analysis of the problem and a solution.

E is for Efficiency. The industrial economy continually makes more stuff out of less labour. More efficient workers, machines and systems constantly add to consumption, and constantly subtract jobs. The lost labour has mostly been dangerous or tedious, so there is little to regret.

Who suffers in the U.S. economy?

Edward Hadas
Sep 26, 2012 14:31 UTC

Barack Obama and Mitt Romney put the economy at the top of their campaign agendas. They have both focused primarily on labour – the high rate of unemployment. The attention is deserved, but other parts of the economy should not be ignored. There is the worrying decay of the nation’s capital stock – the physical, social and financial infrastructure. There is also something wrong in the consumption side of the economy, but there is a heated debate on just what the problem is.

Many commentators believe that the middle class, which makes up the bulk of the population, has a big problem: a decline in living standards. After all, the Census Bureau reports that the $50,054 median household pre-tax income in 2011 was 9 percent below the all-time peak, adjusted for inflation, reached 12 years earlier. That decline in income is so large that it must have led to some erosion in the typical family’s consumption.

Even if purchasing power really had declined by a few percent, the slide was from such a high starting place that loud complaints about deteriorating lifestyles would be unseemly. In fact, though, the median income measure distorts consumption reality. It omits services received without cost, for example healthcare provided by the government and insurers. It excludes the effects of changing taxes and shrinking household sizes. It underestimates the value of technological improvements – think mobile phones and the internet – and of the vast expansion of new, now-cheaper housing during the bubble.

Both sides losing austerity fight

Edward Hadas
Jun 27, 2012 12:01 UTC

In one corner of the intellectual boxing ring is Stimulo. His fighting words: more economic stimulus. History and theory, he declaims, teach that governments should run much larger fiscal deficits in a downturn. In the other corner is the Cutback Kid, who delivers the opposite message: more austerity. He asserts that history and theory teach that governments should reduce their deficits. The two contestants for the Economic Policy Prize are in the midst of a long fight. Amazingly, they are both losing.

Stimulo has the open-hearted enthusiasm often associated with residents of the United States, for three decades known as the land of big fiscal deficits and small worries. His favourite example is the 1930s Great Depression, which only government spending could end. Now, almost four years after the collapse of Lehman Brothers, GDP growth remains slow and the unemployment rate high. The government deficit, he says, should be increased by as much as necessary to push the economy out of its current stagnation.

The Cutback Kid has a more restrained charm, the sort sometimes associated with suave European intellectuals. He praises the virtue of balanced government budgets: sound finances keep inflation far away, support the value of the currency and promote a strong economy by not stealing savings from the private sector, the source of durable growth. After four years of extraordinarily high government deficits, he says, it’s time to cut back.

  •