According to an article in this week’s Bulletin, more people (36.5%) feel that they are not better off than before John Howard was elected PM than feel that they are better off (32.6%). The question seems to have been badly worded, with the apparent options being ‘yes’, ‘no’ and ‘the same’ – the magazine interpreted ‘no’ as ‘worse off’, but without spelling this out clearly some people who think things haven’t changed much could have answered ‘no’.
Even so, only a third thinking they are better off seems low. Income distribution analysis suggests that the benefits of prosperity have been spread through all socio-economic groups. And it’s been a good eleven years for technology-driven improvements: the internet and mobile phones particularly, but also home entertainment. Unemployment is at a 30-year low, and workforce participation at an all-time high.
There are theories that explain why perceptions lag objective statistics on issues like this, particularly when the question asks the respondent whether he or she feels better off. The happiness research has made much of the process of adaptation. When our objective standard of living improves we feel better for a while, but after a while we get used to it. Psychologists such as Danny Gilbert argue that we are not very good at recalling past emotional states. But Gilbert’s theory also suggests that because we can’t remember how we felt, we use theories of how we would have felt instead. Do people’s ‘theories’ of 1996 suggest that things were better then than now?
There is another odd aspect to this poll. Another question asked whether respondents thought that Australia was better off now than before Howard was elected PM. This received a slightly more positive response – 39.4% said yes (compared to 32.6% for the personal question) and 36.8% said no (virtually the same). That’s unusual, because in survey research respondents normally think others are doing worse than they are – partly because views of others are formed from media reports, which tend to focus on negatives, while information sources about oneself are more balanced.
I’m not sure why the personal/Australia in general answers are the reverse of the normal pattern. But I am pretty sure I know why the overall result is so negative.
First, like Newspoll’s recent questions on how issues affect voting, the Bulletin‘s poll mixed in a partisan element by mentioning John Howard. Back in 2004, the Saulwick pool had asked a more neutral ‘Would you say that you are better off, worse off, or about the same as you were ten years ago?’. 52% said better off and 23% said worse off. That result would seem more consistent with the objective statistics. But Howard’s name was a cue for Labor voters to give a negative answer, whose ‘theories’ of pre-1996 include the assumption that things must be better under Labor.
Second, it looks as if Labor voters were over-sampled. This theory is supported by comparing answers to the Bulletin‘s poll with similar questions asked by other pollsters. For example, on the question of which party the respondent would trust to handle the economy, Labor and Liberal were equally divided in the Bulletin‘s poll. But Newspoll had the Coalition at double Labor. On the question of who would make the better Prime Minister, the Bulletin‘s poll found 28% for Howard, while Newspoll found 37% and ACNielsen 43%. On the Budget, the Bulletin poll recorded 27% who thought that they would be better off, compared to 36% of Newspoll respondents.
The Daily Telegraph also thought that these results were implausible. And with gender-studies PhD and Maxine McKew friend Rebecca Huntley involved in framing the questions, they concluded that the bad result for the Liberals was indeed a remarkable coincidence.
I think there is probably a more mundane explanation. Ispos, the firm that conducted the survey for the Bulletin, doesn’t do much political polling in Australia, and this looks very much like they bungled their sample as a result, over-interviewing Labor supporters. Combine that with a poorly-worded question and we are left very much doubting that Australians feel as badly about their situation now compared to 1996 as the Bulletin would have us believe.
Andrew Norton 
“Second, it looks as if Labor voters were over-sampled.”
But even so, can there be so many people who are so totally delusional about what it was like before 96 and what it is like now? Even liberal supporters would say that mid way through the Hawke government things were better than under Fraser.
It’s truly amazing.
I guess we will have to have a decent sized recession reminisce
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JC – There is a history of partisan pessimism seen in standard of living polls, though it is hard to work out to what extent this is real, playing the polls to make one’s own party look better, or delusional.
But we should not forgot that some people will be genuinely worse off, at least in a material sense, due to illnesses, family break-ups, retirements, ‘downshifting’ and assorted misfortunes. Few of these may be the fault of the Howard government, but the question did not require any causal link.
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seems to me possum has the answer.
Interest payments as a % of household disposable income is at record levels in other words less money for all those marvellous things the neighbour already has.
Things aren’t better for those people hence polls like this and polling like we are seeing for a while.
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People are voluntarily borrowing, as opposed to the early 90s when people were involuntarily paying higher rates and stood a good chance of being unemployed too.
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The “Homer thesis” that people are worse off because they have borrowed seems to imply that they borrowed the money and then burned it.
It also seems to assume that people were forced to borrow against their will… or that the borrowing is mostly irrational. Because if rational people make a voluntary decision that normally indicates that it’s good for them.
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Less money money for the marvellous things the neighbour already has, what like a roof and something to eat?
I don’t doubt a lot of borrowing has been spent on consumer goods, but the increasing proportion of interest payments isn’t going into consumer goods entirely, it’s going into mortgage payments. OK, so housing bubbles are not the governments fault and they have little control over those things, but the blame will be placed with governments, especially where policies have been ineffectual or counter productive (the first home buyers scheme comes to mind).
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I’m not sure where Danny Gilbert is getting his evidence from — emotion plays a huge role in regulating many things to do with memory, and there are well known biases (Normal people remember good times much better than bad ones, for instance). In addition things like long-term autobiographical memories are almost always associated with strong emotional events. Try recalling things that happened to you between 5 and 10 years old, and see how many are not associated with emotional events, and this should be self eevident.
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Conrad – I’m not sure that what you are saying necessarily contradicts Gilbert. Remembering some major event is one thing, recalling how you generally felt day-to-day is another.
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“Because if rational people make a voluntary decision that normally indicates that it’s good for them.”
No, it normally indicates that they thought it was good for them at the time they made the decision.
People can borrow money and later regret it. Lots of people have people have borrowed money to buy plasma TVs for every room in the house, enticed by “18 months interest free”, only to find themselves paying back the loans at huge interest.
You can argue that it is all their fault, they should have read the fine print etc, but they still regret the decision. With an ounce of luck, enough of them will blame John Howard.
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Yep. I hear what you’re saying, but that is the correct way to evaluate decisions.
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Re the argument that the debt-to-income ratio has more than doubled while the Howard Govt has been in office, and its effect on our material or emotional wellbeing: the usual response to this is to point to the also-rising asset-to-income ratio; ie we’ve borrowed more, but rising share prices and house prices have made us better off.
However, the asset-to-income ratio has only increased 58 percent since 1996, so it isn’t gaining as fast. I still think the greater level of indebtedness has important explanatory power. To me, it explains why people are upset about WorkChoices even with an unemployment rate of 4.4%. OK, there may be other jobs out there, but the feeling of job insecurity is heightened by the increased debt load.
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“the correct way to evaluate decisions”, possibly, if you think that there is no such thing as society, only individuals and their families.
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Why, Sinclair, is it the “correct” way to evaluate decisions. If people make systemic errors, for example by underestimating long-term costs, and/or by failing to take into account adaption effects on their utility, at the time of consumption, why wouldn’t taking those human traits into account be a more correct way of evaluating decisions than ignoring them?
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Re debt … and private schools! I know people who have borrowed the money to send their kids to private schools by adding it on to their mortgages. I wonder how common that is? Do we really know how much of the debt people are carrying is to finance these sort of choices?
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Hans – Though job insecurity is lower than it has been since records began in the mid-1970s.
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If Gilbert is saying that people generally don’t remember how they felt from day-to-day, then that is not an exceptionally useful statement, because people generally don’t remember much of what they do from day to day, and the fact that, say, on Tuesday I was a bit happier than normal for reasons unknown is not going to be much more relevant than the fact I happened to see more of the color blue than usual (it must have been sunny). Not surprisingly, our memories are not especially sensitive to low level fluctuations in non-specific arousal and how these change from day to day, whether they happen to be about happiness or higher levels of retinal stimuation.
Most of what we remember is autobiographical in nature (or semantic, which isn’t very relevant here unless people judge emotions based on unconscious learnt semantic associations), and it seems reasonable to suspect that when people do these judgement tasks they are basing them on these events (it was a good year, I got a raise that made me happy; I had a holiday that made me happy, and the only bad thing that happened was a car crash…). Thus the chain of inference is surely going question-autobiographical recall-evaluation of memory-answer, in which case emotional states attached to autobiographical memories are surely important
The only real caveat to that is that I believe that if people are in a normal state of mind, they are more likely to have forgotten bad periods of their life than good ones (e.g., I was really sick in 2001), which is probably one of the reasons people can look back at bad events and sometimes find them funny (e.g., getting teeth taken out and having a swollen face) or “not too bad”.
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forget about assets. people are not going to liquidate their homes. That is why interest payment to DISPOSABLE income seems to me , courtesy of possum, to be the clincher on why the polls are so bad for the Government.
You do not need to fear losing your job just to fear losing some income at your present job or at the next one if you have to leave.
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Homer – You should be careful about believing what you read on blogs:) Possum’s sums are wrong; he has added instead of averaged four quarters to get his annualised figures.
Also, the interest data stops before Howard hit real trouble in the polls.
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Andrew
The same phenomenon can be seen in the UK, where living standards have risen immensely since Tony Blair came to power in 1997. However, if you ask people of they are better off, they will say no.
I think its partly just that people forget their situation ten years ago and also that they place greater emphasis on ‘relative’ wealth than ‘absolute’ wealth.
It is irrelevant if you are now skiing every year in the Alps, if your neighbour owns a chalet in the Alps.
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Even if people do have systematic biases they still make decisions based upon their best assessment at the time. Unless people are making decision that they know are bad for them, we have to accept that people expected the decision to be good. Now ex post things may be different. People often regret their decisions. But unless we develop some method of communicating with the past, there is very little we can do about it.
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andrew, I have seen the updated figures and they make little difference.
It isn’t particularly hard to to put projections there as possum has to fill in the blanks.
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the updated figures seems to me without doing any statistical testing suggest the figures hits the Government’s vote with a lag!
forget last paragraph of previous comment as I was thinking of something else.
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Homer – It looks like there is a loose directional relationship in the corrected graphs, though it still leaves 3 elections, 1990, 2001 and 2004 unexplained. At best it is a proxy for things we could measure more directly, such as household financial stress, consumer confidence, or % of households with mortgages in marginal seats.
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Sinclair, while it is obviously true that “Unless people are making decision that they know are bad for them, we have to accept that people expected the decision to be good.”, I submit that it does not follow that assuming people make good decisions is the “correct” way forward. If people systematically underestimates the costs (or overestimate the benefits) of something, say smoking or gambling, then surely there is an a priori case for government intervention to address the “internalities” that result. Of course, one would still want to compare the costs of government intervention with the costs of the internalities, and it may be that in many cases intervention is not warranted. But that does not make it incorrect to do the analysis; nor “correct” to ignore the internalities as you seem to suggest.
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Sorry, Tom. I hear what you’re saying, but I still cannot agree with it. As regards smoking/gambling people live the lives they choose. Now it is not our place to say how others evaluate their choices, or their own cost/benefit analysis. I barely accept the notion of externalities (as a theoretical principle) but have no time for ‘internalities’. Ignorance is one thing, but protecting people’s future selves from earlier selves is recipe for nanny statism.
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Andrew,
it showing for average households so those households with a mortgage would be highly stressed, a little bit less those who took out investment loans for property a few years ago and then of course you have those who have home equity loans who have merely borrowed to buy consumption goods like plasma televisions etc.
It still gives a good reason why most people are surly rather than being delighted
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What is it with the obsession with plasma TVs? Are bogans not allowed to have them?
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Hey Tom — how do you know that people are making the wrong decisions?
If you get 10 utiles out of smoking today and you get -5 utiles from your smoking later (in a two-time period world) then it would be a good idea to smoke. But if you ask a smoker in period two they will only be experiencing their -5 and so they will say that smoking was a mistake. (And of course, you should discount the -5 utiles.)
Of course, people will sometimes make mistakes. Nobody is claiming that all free decisions are perfect. But if making the right decision for yourself is hard, then how much harder is it to make the “right” decision for everybody!
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A debate on paternal libertarianism.
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Heh – libertarianism showing it’s true colours. Basically, it’s Marxism without the implementation plan. What’s the point of giving people freedom if you despise them for exercising it?
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I recognise the words you used Rubie… but I wasn’t able to find any of them put together in a sentence that made sense. What exactly is your complaint against non-violence?
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I have no complaint against non violence, I’m just putting Marxism and Libertarianism in the same boat. Both philosophies claim to be about freedom. Neither seem to have any supporters who are comfortable with it.
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Sorry Sinclair and John, but the “current self vs future self” issue does not address the point of systematic misestimation of the costs or benefits of certain consumption decisions. What if both the current self and the future self misestimate in the same direction – say they both underestimate the costs of gambling – then no amount of negotiation beteen the current and future self will correct the problem.
Of couse, I agree with Sinclair that acknowledging the reality of internalities may add to the case for intervention. Where we differ, it appears, is on whether the benefits of state intervention, however big they are, would ever be large enough to justify the costs. Sinclair appears to believe that they never would be, whereas I believe that there are likely to be occasions where they are. At a minimum, I think it’s an open empirical question.
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Tom – Perhaps we can agree, at the empirical level, that you think I over-estimate the costs of intervention, and I think you under-estimate the costs of intervention. At the more philosohical level, however, I would never advocate or employ state violence to get you to change your mind.
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Yes, your first point Sinclair is a nice summary – and its good to know that we have something close to the same underlying framework.
But, oh dear, you then use the term “state violence” in your second point in an apparant attempt to take the high moral ground on this issue. Now, I know that Libertarians love to characterise any form of government intervention in this way. But just as one generally can’t have a sensible conversation on indigenous policy with somebody who insists on always labelling the first fleet as an invasion force, nor does the use of such extreme descriptors by Libertarians – for anything government does, including simply diseminating information – invite sensible discussion about the merits of intervention in any particular case. Yes, we know that governments raise taxes and make laws with the threat of the restrictions on liberty, through the use of force if necessary, to encourage compliance. But frankly, whoopee doo! Certainly that observation will not convince many people that the “correct” way to analyse any particular issue is one that always leads to the answer that the government should not intervene.
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Okay – state violence can be interpreted as an emotive term. Perhaps too strong. How about ‘coercion’? Call it what you will.
I remember when compulsory seat belts regulations came in South Africa. It was announced that the Traffic Police (a separate organisation from the SA Police) would ‘assist’ the road authorities. 🙂
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Sinclair, instead of thinking you’re coerced by ‘the State” you might think instead of it your community thinking of your care and safety.
Perhaps I’ve been reading too much right-wing stuff but even I had to laugh when I read in yesterday’s Sunday Times that our Education Minister is promoting the teaching of respect for others – he said: “”We can’t just worry about ourselves. We need to make sure we worry about others, as well.”
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Russell, I’m well aware of that argument. I don’t believe it.
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Russell you seem to be versed in Newspeak.
http://en.wikipedia.org/wiki/Newspeak#Politically_correct_euphemisms
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Just joking with the heartless Sinclair, Terje. I hope you approve of the quote from our Education Minister: this might be one of those ‘be careful what you wish for’ situations – right-wingers wanted more emphasis on ‘values’ in government schools. Now you’re getting it – children will be taught to ‘worry about others’ – that’s a good start!
More seriously then, libertarians agree with some regulation (basic road rules?) I suppose, so our difference would be about the degree of regulation. How better can we work out these differences than the way we do now?
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Selfishness is a value too. Respecting other peoples privacy is a value. One of the most delicious ironies, I think, is the ‘community’ crapping on about privacy while also ‘stick beaking’ into peoples choices and giving ‘advice’ about what one’s future self might prefer.
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Russell – personally I don’t know how anybody can become a libertarian without expending a lot of time and thought on the question of what makes for a good society that will be good for people. As a parent I think kids should be taught concern for others, although I’m not convinced that the school can do a lot if the message from home is contrary to this. If people grow up believing in the efficacy of coercion then we are missing the mark somewhat.
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“Selfishness is a value too.”
The Macquarie Dictionary defines value as:
“the things of social life (ideals, customs, institutions, etc.) towards which the people of the group have an affective regard. These values may be positive, as cleanliness, freedom, education, etc., or negative, as cruelty, crime, or blasphemy.”
Which category would selfishness fit into?
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THE VALUE OF SELFISHNESS
In my view, if the choice is between selfishness or selflessness, selfishness is generally likely to result in a better society overall. As Ayn Rand said, “whose interests does a society of altruists serve?” And as Adam Smith pointed out, it is not from altruism that the butcher puts meat on our plates; rather, it is from self interest.
Of course, the extent to which selfish behaviour promotes social optimality will depend in part on the extent to which externalities are internalised by regulation or social norms. And of course, in the real world the choice is more subtle than pure selfishness and pure selflessness. There is a continuum of behaviour from pure “self-concerning” to pure “other concerning”, and economists recognise that self-interest can be broadly interpreted to include concern for others where utility functions are inter-dependent, and/or where one has absorbed pro-social norms.
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TomN – I agree. There is nothing in your comment that strikes me as being (even) controversial. Love the Rand quote.
Russell – selfishness would fit into “ideal”, “custom” and “freedom”.
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Tom N wrote:
As Ayn Rand said, “whose interests does a society of altruists serve?”
Two points: (1) This is what’s commonly known as a false dichotomy: having self interest does not necessarily preclude being altruistic as Rand is implying and (2) Rand was a crank, not a philosopher in any reasonable sense.
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‘THE VALUE OF SELFISHNESS”
Those capitals are just too provocative. If you write that “economists recognise that self-interest can be broadly interpreted to include concern for others where utility functions are inter-dependent, and/or where one has absorbed pro-social norms” you could be saying that self-interest includes self-sacrifice (an absorbed pro-social norm?) – which is practically meaningless.
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No, not “The value of selfishness”, it was “The virtue of selfishness“.
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SELF-SACRIFICE JUST ANOTHER COST
Hopefully, Russel, you accept that some people can rationally choose to terminate their own lives to avoid further net physical or psychological pain. I will also presume* that you can see how suicide or euthanasia etc can be easily fitted into a personal benefit-cost framework.
I also presume* that you can see how it might be in one’s own interests to do good for others, and that one might get psychic benefits from simply doing “the right thing” or from helping others, or avoid psychic costs by not doing “the wrong thing” etc.
Well, adding these things together, what do you get?
Consider, for instance, a mother who throws herself in front of a car to shield her baby. While one can reasonably label such actions as self-sacrifice and altruism, it is not difficult to understand this as her equally acting with regard to her own interests, which after birth happen to encapsulate – and indeed give greater weight to – the wellbeing of her baby too.
Likewise, consider the Jihadists who surrenderred their lives to bring down the twin towers. This can be characterised as self-sacrifice, but at the same time they clearly gained great meaning from doing what they saw as Allah’s bidding, and/or might have felt a sense of shame – borne of cowardice or insufficent zealousness – had they not enlisted in that enterprise.
From this viewpoint, the goal of pro-social norms – whether they be incalculated through the fear of god or other fairytales, or embedded in DNA – can be characterised as seeking to align social benefits and costs with private benefits and costs, so that individuals automatically (ie without the need for additional government intervention) act in socially beneficial ways.
As a policy analyst, I would submit that such a characterisation has practical uses, and that putting self-sacrifice within an individual benefit-cost framework is neither difficult nor meaningless.
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* I think these are fairly weak assumptions, but obviously if you do not accept them, then you will not necessarily accept the conclusion. However, time and space do not permit me to justify to assumptions at present.
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I was looking at your capitals:
‘SELF-SACRIFICE JUST ANOTHER COST”
and thinking how much more economical than something like this (the Desiderata of the 90’s):
http://iranscope.ghandchi.com/Fun/dogood.htm
not quite as inspiring though.
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“Well, adding these things together, what do you get?”
Well, you get those two things, whereas you might have had a few more things as well. Valor, courage, nobility, magnamimity … you know, those kind of things that are illustrated in the stories you read to your children to help teach them good values!
I think even that villan John Howard is going to be disappointed if you tell your children: the thing about Simpson and his donkey is that although Simpson was killed helping others, aged 22, really he was a winner because he got so much psychic benefit out of it.
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You’ve certainly upped the ante here: murderous Jihadists, Mums shielding babies, suicides …. but no, I don’t accept the proposition that self-sacrifice = psychic benefits (see thread on buying Fairtrade for right-wing view that people make moral choices for the ‘credit’ it brings them).
The psychic benefit may be not ‘worth’ as much as the advantage foregone. How do you compare the ‘worth’ of a psychic benefit with a material benefit.
The anticipated psychic benefit may not have been any significant part of the decision to act.
You can’t treat these matters as if they were just balls on an abacus to be flicked around in calculation, or part of an “an individual benefit-cost framework” because it’s too small and mean a framework to want to bother with.
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