Show host Gene Tunny talks with Dr. Nicholas Gruen, CEO of Lateral Economics, about the increasing focus of governments on wellbeing. For instance, former NZ PM Jacinda Ardern rebranded the national budget as a Wellbeing Budget, Wales has a Futures Generations Commissioner, and Australia is developing a new wellbeing framework, Measuring What Matters. Gene and Nicholas discuss the limitations of the current top-down approaches and platitudes, and consider potential solutions for better integrating wellbeing into policymaking.
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What’s covered in EP187
- What is the “well-being agenda”? (2:44)
- The “Easterlin paradox”. (5:08)
- How do you make these judgments? How do you measure well-being? (10:50)
- How is this relevant for policy? Should governments be tracking this broader measure? (28:36)
- Is complexity a plus or a minus in the Treasury wellbeing framework? (33:39)
- Why do you need a framework? (40:02)
- Good examples of programs which could improve wellbeing. (44:29)
- The importance of being connected to family and friends. (53:42)
Links relevant to the conversation
Nicholas Gruen’s YouTube channel:
Video version of this episode on Nicholas’s Uncomfortable Collisions with Reality podcast:
Wellbeing: can we escape the iron law of business-as-usual
Measuring what matters — second consultation process | Treasury.gov.au
Fairfax Lateral Economics Index of Australia’s Wellbeing Final Report (the HALE index discussed in the conversation).
Gov’t wellbeing budgets & frameworks: useful or useless? w/ Nicholas Gruen – EP187
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.
Gene Tunny 00:06
Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. In this episode, I chat with Dr. Nicholas grilling about the growing interest of governments in well being something broader than living standards or GDP per capita. Former New Zealand PM Jacinda Ardern, rebranded her national budget as a well being budget, Wales as a future generations Commissioner. And now Australia is going to produce a wellbeing framework called measuring what matters. As you’ll hear in our conversation, Nicholas is highly supportive of bringing wellbeing into policymaking. But at the same time, he’s sceptical of the way we’re going about it. He breaks down what’s wrong with the way we’re doing it. In short, there’s too many platitudes and too much top down thinking, and he explains how we could really make a difference if we did it right. Nicholas is CEO of lateral economics. He’s an angel investor, and he’s headed various government inquiries, including the Australian Government 2.0 Task Force, according to the Financial Times as Martin Wolf, Nicholas is a brilliant man who deserves to be better known, although he’s widely known within Australia, and he has an ever growing international reputation. This episode is at joint production with Nicholas as YouTube show uncomfortable collisions with reality. So please consider checking out his other content on that channel and you get a chance, a follow up to the conversation, this episode will be available on that channel brought out now for my conversation with Nicholas grown on well being. I hope you enjoy it. Nicholas, thank you, good to be with you. So I mean, you’re aware that New Zealand has a well being budget doesn’t it? And our own government here in Australia, it’s going to be releasing a measuring what matters statement. So it’s looked at what New Zealand’s done and it’s been? It’s excited by that. There’s a lot of interest in well being at the moment. What do you attribute that to Nicolas?
Nicholas Gruen 02:43
It comes goes, Gene, I think this, this urge, it’s an anti agenda. In other words, it comes from a frustration with the idea that we are obsessed with economics, we’re obsessed with dollars and cents, we’re obsessed with a single measure. And that single measure is GDP. And there’s a lot to be said for that. GDP is in fact, a much better measure of human wellbeing than we think. But that’s a little bit like saying democracy is a terrible, it’s a terrible mess. If you have to have a single measure, it’s, you know, I think you we can improve it somewhat. But there are all kinds of ways in which GDP is a much better measure than you might think. And that’s kind of partly because you can’t get rich without attending to basic social facts. And social institutions like schools, hospitals, families have to be in reasonable functioning order, if you’re going to have a wealthy society. So in a kind of an indirect sense, measuring how wealthy countries are, does help you distinguish between societies that are relative functioning relatively well, and societies that are not functioning relatively well. Please don’t think that that’s me saying we should put down our classes and forget about the deficiencies in GDP. So Bobby Kennedy put it best many years ago, 1968, when he said that GDP measures all those things in life, except the things that matter most to us, how well we bring up our kids, how beautiful our cities are, how kind we are to each other, how we manage how effective we are staying out of wars, GDP doesn’t measure any of those things. And it doesn’t measure a whole lot of other things as well. So that I think quite a good way to think of the well being agenda is to say that it’s trying to draw our attention to those deficits. And I’m very happy to say that it should live or die by how successful it is in addressing those deficits.
Gene Tunny 04:59
Okay. So wellbeing is going to be correlated with GDP per capita to an extent and is it the case?
Nicholas Gruen 05:08
And we see that in the there’s this famous thing called the Easterlin paradox. Why don’t you tell us what these? Oh, well, I
Gene Tunny 05:15
Was gonna ask you that. The way I the way I remembered if I’m remembering correctly, is that up until level of Is it personal household income, which years ago, I think was about 75 or 80,000. US dollars,
Nicholas Gruen 05:31
it was quite a lot less. Was it a lot less? Was it? Yeah, yeah. So you get a strong correlation between GDP and subjective well, and people telling you that they think their lives are working out relatively well, if you go, and it’s not very surprising, you go and ask people in war torn Sudan or somewhere like that a lot of highly corrupt and poor places. Well, being is low and GDP is low, and they climb together, and then they tie a lot and then the relationship tails off. And I think it was about $20,000 per annum, where you get that tail off. We remember this is maybe even less than that, because remember, I think it’s dates to 1974, the Easterlin paradox. And in many ways, it probably comes out of the kinds of sentiments that Bobby Kennedy was giving expression to in 1968. And it’s it says, Look, after you get tolerably wealthy, other things seem to matter more to people than how much more wealthy they’re getting.
Gene Tunny 06:37
Yeah. And what’s this idea of well being is so I’d like to ask is this happiness? Is it utility? To what extent is governments when they’re promoting well being is that about promoting the greatest good for the greatest number as Jeremy Bentham expressed it? How do you know?
Nicholas Gruen 06:54
I mean, I like to be vague about this. And I like to be vague, constructively invasions. And what I mean by that, in fact, if you’re vague, then you can honour the well being agenda as and when I called earlier, a kind of anti agenda, it is saying, hang on, where we’re never, it’s pretty unlikely we’ll ever not managed for GDP, but that leaves out all these other things. And the thing is that if you try and same, you can use words, I mean, Bentham had this problem himself, when he said the greatest good for the greatest number, he could never quite say what good was, he would sort of associate it with pleasure or whatever. And, as you know, what economists did in the, towards the end of the 19th century is that they did a little bit of on the spot, metaphysics and said that economics was about utility, that the ultimate out quote from the economy was not money, can’t take it with you, and you can’t eat it. It was money existed to improve utility. And I think utility is a nice word, it anchors the activity to what we all think of what uncertainly we did in the late 19th century and early 20th century, as all the useful things about life. Today, our lives are much more postmodern, they’re much more saturated with fantasies, entertainment, advertising, and so on. And that’s created all I mean, it’s right, why rather like that, the the, this is an Australian word for people overseas, but I’m going to use it anyway. The Daggy if you like nerdy sense of the word utility, it’s saying how can we be useful and we get a lot of utility. A poor person who is a paraplegic gets a lot of utility out of a wheelchair, or hundreds of 1000s of dollars worth of utility. If you want to get that much use that much usefulness to someone who is able bodied and has plenty of money, you’d have to do an awful lot to be more useful to them than a wheelchair is for a paraplegic person. So I think of it as quite an anchoring quite an egalitarian idea. So to Bentham, and this is one of the things that’s one of the characteristics of economics during its period of what I call clarified common sense. People like Alfred Marshall, Cecil Pigou, who were working toward in the turn of the 20th century, they built their idea about what the economy about was about around usefulness. And one of the upshots of that was that if you’re just focusing on usefulness $1 to a poor person or a pound to a poor person buys much more usefulness by It supplies them with much more urgent needs. If they spend it halfway wisely, then it can provide to a wealthy person. So that injects into our thinking a degree of egalitarianism in the guise of scientific thought, or if you like, economics has clarified common sense. So I see the well being agenda as reviving some of those ideas. And one of the people who’s responsible for it, Richard Layard, at the London School of Economics has written very much in that in that kind of tradition.
Gene Tunny 10:38
Right? Okay. So you talk about this idea of $1. In a poor person’s hand, the more valuable than in a wealthy person’s are the utility that comes from it? Yeah, but how do you make these judgments? I mean, can you do this scientifically? How do you measure well being for example, can you actually put a number on it? How do you think about that,
Nicholas Gruen 11:00
and you can’t measure utility either. So So modern economics, after that period got mesmerised by the idea of being scientific. And it didn’t get anywhere. All it managed to do is to we had a, if you like, a blurry vision of what was true, because I think almost every person listening to this will say, yes, yes. In general, on average, it’s strongly true, that money going to poor people, right now, with a budgets being prepared, and people are talking about increasing the dole for people over 55. Well, there will be some people who take it to the casino. But most people and I don’t know whether that buys anything, probably buys less, they probably buys less utility, less well being than money to me or you. But most people will spend it on things that are much more useful. So I don’t want to say Oh, well, we can’t be scientific about that thought, therefore, we’re just not going to have it. But that’s essentially and we can talk about this more if you want to, but what you can just agree with. That’s essentially what happened in modern economics from about the 1930s onwards, where we moved from a criterion of well being, which basically said, everyone’s wellbeing can be presumed to be everyone can presume to count the same. And therefore, if we’re just focusing on well being, and of course, we can’t just focus on well being, we’ve also got to think about incentives and stuff like that. But abstracting from that, ignoring that it’s a powerful, stylized fact, that money to the poor, is urgently needed, and money to the rich is not. And that basic idea kind of disappeared from the methodology of economics, in the pursuit of making it more scientific. And so we watered down the idea of what a improvement in the well being of a population was. And all we said was something which is sort of useless for practical purposes, it’s okay for modelling and that’s called Pareto, making a Pareto improvement, named after bill for a great thinker, Vilfredo Pareto, who ended up being rather sympathetic to Mussolini towards the end of his life. But he was he didn’t like the idea that you could compare any one’s subjective, state with anyone else’s, he produced Pareto wellbeing, which says, you get a Pareto improvement only if you can show that you can improve one person’s well being without harming anyone else’s. Well, that rules out progressive taxation, it rules out actually pretty much anything you’ve worked in the treasury, it’s almost impossible to do anything in policy without fight without some losers turning up. And then economics has nothing to say about that. And I don’t think that’s good news. And I think the well being agenda is one way to remind ourselves of that lack that absence. And it’s an excuse to try and bring back some of this not to, and maybe we’ll get to this not to erect a kind of big alternative approach with a big brand new thing, but a correction to some of the obvious moats in our eye on this in the sort of ways economists are thinking at the moment.
Gene Tunny 14:39
Okay. So how can we measure this? You’ve done some work on this Hale index? Is that a way of measuring well being can that be useful for assessing whether our well being has increased or
Nicholas Gruen 14:52
moving into that? That’s a good illustration of what I’m trying to say because I guess you could mark at the Hale index. I’ll explain what it is in a minute, as a sort of brand new way to conceptualise well being. But that’s not how we thought about it. We started with GDP for some of the reasons that I’ve outlined earlier. And then we said that there are some obvious ways in which GDP doesn’t tell us, that doesn’t give us what we can correct this in big, ugly ways. Where there are big ugly deviations from common sense. And then we know that we’ll, we think we’ll have a better measurement of well being, and it won’t be perfect. And it’s not something we want to run away with. But it will help us think about policy priorities, and talk about whether we’ve been getting richer or poorer as a society. So let me give you some examples. GDP is blind, to whether young people from 15 to 25, are spending their extra money going on holiday, or going to TAFE going to uni, going to school, and building what economists call human capital. We take that into account because we say that if you are spending this money, on your education, your knowledge, your training, your capability, then you are investing it. And so we put that back into GDP. And of course, if you think about how long in our lives we educate ourselves, well, 12 years is a kind of minimum for people pretty much now. And a lot of us have at least another three or four or five or six years. That’s a huge amount of your life. And therefore it’s a huge part of the economy. And so when we started, when we put that in, we changed the you know, you could see that as Australia invested in increasing retention in schools, which happened quite in a big surge during the whole government. And then, as we as we got more and more people with cert three and above qualifications, that that produced a large surge in benefit. And that would be a good thing to think about. That’s something we should congratulate ourselves on when we when, when it’s working and, you know, give ourselves a talking to if we’re not making those things happen. And another way to think about this is to say that the business will alter in this period, the business community, we’re obsessed with talking about workplace relations and workplace relations are quite important. But that’s the interface that businesses have with policy, that’s the one that they think about. And it’s vastly less important. I mean, if you do a really bad job of either, you’ve got a lousy economy on your hands. But if you are doing a halfway tolerable job of either, then human capital is vastly more important than exactly how you configure workplace relations. And anyway, no one’s ever worked out a perfect way to configure workplace relations. So one way to think about this is to say that the Hale index, this index that we built, tells you what’s important and what’s not. And some other big differences, that reflecting the comments I made about money in the hands of poor people buys you more urgent needs than money in the hands of wealthy people. During the last 20 or 30 years, Australia has become somewhat more unequal, it’s it’s a little overstated. People tend to overstate it, they tend to think we’re nearly there were as bad as the United States or the or Great Britain. And we’re not by quite a long chalk. But nevertheless, there’s an effect there. And so that that should go in. And if we have become richer, but more unequal, it’s not clear that we’re better off. And so, you know, I think quite a good, quite a good measure of a just a single measure of economic well being is median income, and median income has not grown as much as actually I’m not sure about that median income. No, I think median incomes not grown very strongly, you might be able to correct me on that. But what we’ve done well as we’ve looked after people at the bottom quite a lot better than they have in the United States. And the PR people at the top have been very well looked after, but not nearly as well looked after as they have been in the United States. Anyway, so it takes into account inequality. It tries to take into account natural capital and the result that natural capital is you know, the quality of our air and our streams and, and the amount of minerals that remain in the ground. One Upshot from that which I’m not, I’ll just tell you about it is that we, the methodology we arrived at We certainly didn’t try to come up with this result. But the methodology we arrived at told us that natural capital, at least in terms of diminution of natural capital, at least in terms of what’s happened so far was pretty minor. And that even took into account greenhouse. But of course, that depends on the trajectory that greenhouse takes. So that at least gives you something to argue about that, you know, you’re not just waving your arms around, as I’m doing right now. And then the other thing we did is we talked a few areas of mental health, which have, which are common, and have large impacts on well being. And they were depression, and anxiety and obesity. Well, obesity is a physical condition. But that has a notice that is correlated with large reductions in self reported well being. And so we threw that in the mix. And as obesity has been rising, that’s been taking 10s of billions of dollars off our GDP. So that’s what it looks like. And that to mention what I said before, I don’t want to con anyone into thinking this is a comprehensive measure of well being even though sometimes it gets reported in the press is that, but I want to say, look, it’s GDP, and then we’ve made some big changes where the worst problems of GDP exist. And that’s got to be a good thing. It’s, it’s the old clarified common sense idea, rather than welcome to the new paradigm.
Gene Tunny 21:32
Okay, so the Hale index, Harold age, lateral economics index, on well being Yeah, well being just so clarification, you talked about human capital. So are you valuing the time input that people are spending in education and training because the the actual resource cost of the education and training or the value added, that’s already counted in GDP are
Nicholas Gruen 21:58
correct. So what we say that if you go to TAFE, you go to uni, you build your human capital, the resource cost of doing that as already take is already measured in GDP, we paying your tutor as your lecturers, we’d pay for the buildings if you go to them, and, and so on. And but then we say that at the end of this process, you have invested in an asset and that asset and so and we do the same, you see GDP doesn’t contain depreciation. So it’s a basically, it’s purely recurrent. And it has no way to conceptualise the capital account, it has no way to conceptualise whether you’ve made yourself richer for the future, or poor for the future. And so it tries to do that. Does that make sense?
Gene Tunny 22:55
I’ll have to have another look at it. Yeah. Because I mean, the, what I’ve seen in the past is that people have adjusted GDP for the depreciation. So part of the That’s right, well, yeah, yeah. Part of capital expenditure that occurs is just to replace existing capital. So, you know, some people argue, well, you should actually look at net domestic product or net rational product. And
Nicholas Gruen 23:21
we do that in. So we start at that. I mean, I didn’t mention that because I just thought it was too technical, but we start with NAMI national income. Okay. So we got depreciation in there. So we put capital, so we need to put capital appreciation in as well.
Gene Tunny 23:38
I see what you’re driving at. Yeah. Okay. Capital appreciate. Yeah. Okay. Right. Well, I’ll put a link.
Nicholas Gruen 23:44
I mean, let me just let me just so people can conceptualise it. So you start with GDP, which has no measure of depreciation, your point, but the buildings you had this year, are worth less at the end of this year than, let’s say plant and equipment. Yeah, the cars you own are worth less at the end of the year than this year. So we take that out of GDP. And if you’re going to do that, by exactly the same token, you would put back into GDP all the ways in which you’ve built capital. And the main ways in which you built capital is through human capital. There’s sort of three four times as much human capital in the economy than there is physical capital.
Gene Tunny 24:27
Okay, okay. The big effect
Nicholas Gruen 24:29
two big effect.
Gene Tunny 24:32
Okay, we’ll take a short break here for a word from our sponsor.
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Gene Tunny 25:07
Now back to the show. Like what I wonder, is whether we are actually much better off than we were, say, in, in the 80s or 90s. Because, I mean, clearly the technology is just incredible that we’ve got now I mean, I remember having a Commodore 64 When I was in high school, with 64 kilobytes of RAM. And now I mean, everything you’ve got now, it’s just I don’t know how many 1000s of times better it is. But it’s just an incredible improvement. But yet, I don’t know how much better the quality of our life is, particularly with all the smartphones and the distraction? And do you know what the evidence is on that though? What is it?
Nicholas Gruen 25:50
Well, my style? Well, I mean, leaving the smartphone, the distraction point out, because that’s a very different sort of thing you’re thinking about, we can talk about that. But my kind of guess from scanning the literature on that is, so I think one of the main things you’re talking about is that a lot of the streams of benefit that we get from technology of free, or you go to Google, we go to Facebook, if you call that a benefit, there are just all these free services and free doesn’t work with GDP, GDP to GDP, it’s just invisible to GDP, because GDP, put your binoculars on and then whenever someone’s paying for something, you work out, you know, you say, Oh, that was $2, that’s $2 to GDP last whatever they paid for it. And anyway, it’s a, it’s an process of serial accounting, working out how much value has been added with each transaction. And in this process, the value that’s added is not counted, some of the commercial value that added is counted, and that is the advertising revenue. But so so again, it’s it raises the question of the household economy as well. I didn’t mention one of the great weaknesses of GDP is that GDP goes up. If you go out to dinner, and it doesn’t go out, if you if you get someone else to pay for your dinner, or you know, to cook your dinner and pay for them, that that GDP rises, but if you cook it at home, GDP doesn’t rise, I could give you some more striking examples, more sexual examples. They’re a bit more striking, which is that most people’s sexual activity doesn’t contribute to GDP, but going into a prostitute does. So that doesn’t seem to be a very good way of measuring human wellbeing. So there are anyway, we haven’t tried to correct for those things. But those are the those are some of the sort of paradoxes of GDP. Yeah. But I don’t mean to be too critical of GDP because of it. Clearly, we are, we are wealthier. And
Gene Tunny 28:06
to an extent, I mean, just given the expansion of I mean, houses are much larger, on average than they were 30 years ago. We’re probably I mean, the quality of cars is better. We can you know, then they’re cheaper in real terms, I think. And partly that’s because we’re brought down the tariff wall here. But yeah, I guess we are better off in a material sense. But it’s not as much as you might think, if you just look at the GDP per capita numbers, because there are these other things we should be taking into account. Yeah,
Nicholas Gruen 28:36
yeah, that’s right. That’s right. I mean, the other thing is, I’ll just tell you, I went this afternoon to somebody who was looking at an MRI of my shoulder, which is sore and tingling. Now, I’m pretty confident that I mean, there are various ways various pathways, you can imagine that the existence of MRIs is picked up in GDP, I mean, you pay money for the for the MRI, but the fact that the fact that he can look inside my shoulder and look at where the bone is, and where the where the sinews are on sale, there’s a spur there. And we couldn’t do anything remotely like that. As an economist sitting there, very few people would have this reaction when they’re doctors looking at an MRI. But that was what I was thinking about. I was thinking, well, I doubt if that is properly reflected in productivity statistics. And in GDP. It’s an incredible thing to basically have your doctor be able to look right inside things and you know, that that’s a very powerful thing.
Gene Tunny 29:43
Yeah, yeah. Okay. Okay. So I think basically, the takeaway is that well being is this it’s much broader than than GDP. It’s challenging to measure. How is this relevant And for policy, Nicholas, I mean, should should governments be tracking this broader measure? Should they be tracking something like the Hale index? Or the ABS be producing it? And should they therefore then adjust their policies to address this if there’s a deficiency? And yeah,
Nicholas Gruen 30:15
so So that’s, that’s the nub of the question. So there are various lots of people say how wonderful it is, you’ll hear this it’s almost a cyanide, I will hazard to guess it’s a sign that you’re listening to someone who hasn’t really thought about these things very carefully, or sceptically when they start talking about Bhutan. So Bhutan made a really big splash by saying that it was managing its economy for gross national happiness. But if you take it seriously, and you look how they do it, it’s a bit of a joke. No offence to Bhutan, good on them. And they’re doing quite well. So you could argue that it’s all because of well being. But if you try to look at what they’re doing, I mean, it’s very hard to get anything published after about 2009 on the subject anyway, from Bhutan. So it’s a cart that people love the idea that they’re managing for wellbeing. I’m not sure exactly when, but probably in the, the tooth, the, you know, the 2000 to 2010. But maybe earlier than that fair bit of pressure was put on the Australian Bureau of Statistics to produce a wellbeing measure. And I basically pushed back and said, Look, we will produce a thing with series of indicators called measuring Australia’s progress is that it, of course, and we will not aggregate it all and pretend that we can put this all in a single measure. And so you know, they look at natural capital, they look at equity, they look at the environment, and they produce rich data on this stuff. But the calls keep coming, oh, we need to. So in other words, if we had this big demand to manage for well being, then that’s fine, the ABS could produce this data. And then our politicians and our senior thought leaders will put inverted commas around that. They’d be saying, Good, we’ve got the data. Now we’re going to manage for wellbeing, but that’s not what happens. So that’s a sign that something funny is going on. And so around the world, we hear this idea that we’re going to, we’re going to manage for wellbeing. Now, we might be able to go into this in more detail in the next podcast that we’re going to have on this where we’re going to have a closer look at some of this. But I think that is a mistake. I think it is a mistake to go running around creating, quote, wellbeing frameworks, if there are a wellbeing framework of a particular kind, because so New Zealand has done that. Well, let’s go through what’s happened. The Treasury announced that it had a well being framework. And this was announced in a speech by a senior Treasury official, who shall remain nameless, but is closely related to me. And it was announced that there were these five principles in the treasury Wellbeing Framework. And you can imagine, you know, we can work out what they are the first, you know, the top three or four are going to be prosperity, equality of some kind, and we’re going to read a reference to equality. Another one will be a reference to the environment, you know, health, happiness, stuff like this. And the fifth one was happened to be complexity, which was intriguing. And I sort of looked at this and thought, Well, that’s it that’s on what’s like, I can see how complexity is sort of important. But is it a plus? Is it a minus? What’s it doing that? Now, the Treasury Wellbeing Framework or so it was called a well being framework? I think it was quite obvious at the time that it was not a well being framework. It was a set of talking points. Is that a bad thing? I don’t think it is a bad thing. Can Henry wanted the Secretary of the Treasury at the time wanted to make the point or wanted Treasury officials to think more broadly about what the Australian economy was about? No problems there. But it wasn’t a framework because of framework constraints. You and it’s it, you will be applying this framework. Wherever you do work, wherever it’s relevant. I can prove that that didn’t happen, because the Treasury wrote a submission to I think the a triple C on Consumer Policy and another submission on regulation of financial instruments. Now, if that doesn’t raise the question of complexity, nothing does and the word complexity did not appear in those submissions. I’ve documented this So, so it wasn’t a framework. That’s okay. But it’s a very good illustration of a number of things, which is that, you know, it’s very easy to grandly talk about visions. And we should be suspicious of that, we should be suspicious of that for lots of reasons. But without going into, like, if you’re serious about that, I’d be suspicious, because I don’t think it can be done, I don’t think it’ll be helpful. I think it’ll all fall over. But in fact, you don’t really have to worry, because when you get suspicious, what I’m mainly suspicious of is that this is what I call a re skinning operation. And we will get business going on more or less, as usual, with some new words dotted around. And I think that that’s clearly demonstrated in the, in the case of the Australian treasury. And And to top it all off. John Fraser, when he was the Treasury Secretary, just got rid of it. And a number of people were quite upset. I think you were a bit upset. And you said you were sad to see it go. And I said, Well, I’m sad to see it go. But it will it made no difference and making everything go will make no difference. And and I said, Can you tell me anything? Any thing, any piece of work that was changed for you in the treasury by the framework? And I think you had nothing to say then. But you might have more to say now?
Gene Tunny 36:24
Well, I think what I said at the time, Nicholas, was that I think it was designed to change the mindset. There authorising words. Yes, yes. And I don’t think you could ever say, Well, as you mentioned, there was a a submission that it appears wasn’t informed by the well being framework at all, which I think is a really, that’s a that’s, that’s not very good. I mean, I’m surprised that complexity wasn’t, wasn’t mentioned in that. But yeah, you’re right. I mean, it’s very hard to operationalize these things. I mean, because you know, these things come from, you know, the senior executive, or I think it was either Ken Henry, or Blair calmly or someone like that very senior in the treasury. And I mean, you know, that they wanted to have it permeate through the organisation, they wanted people to change their, their mindsets from because there was a concern treasury, or we’re just all the corner Kratts. And all we care about is GDP and the the economic numbers, we’re not concerned enough about broader well being. So I think it was well motivated. It just didn’t, it’s hard to change practice
Nicholas Gruen 37:32
being stuff is well motivated. And that’s my point. Let’s, let’s have a little D tumescence, about how well motivated we all are. And let’s attend to the difference that we’re making. So that’s the Treasury, that’s the Australian treasury. Now the New Zealand Treasury is a very different story than New Zealand Treasury, actually kind of contacted me I’d written some stuff on well being and they contacted me. And I was amazed when I had a look at what they’ve done. They’ve been working away before Jacinda Ardern, turned up and said, Let’s have a well being budget. The New Zealand Treasury were actually doing a great deal of work, trying to reconceptualize the national accounts, and all this kind of stuff. And they were pretty serious about doing it. But I’ll tell you what’s happened. We can talk a bit about this, about their well being budget in a minute. But what’s happened is they have put a lot of work in and the result is that at least in principle, whether they’ve got to this stage or not, I don’t know. But in principle, they would be able to tell you, the world self reported well being of Maori in Rotorua. Now, isn’t that impressive? Well, actually, it’s not impressive, because what’s not impressive about it is that you’ve you’ve put a huge amount of effort and resources into something and thinking resources. And what are you missing out here? Well, what I’m arguing you’re missing out is, you know, what the Mary well being in Roger or is and you’ve got no further information about how to improve it. And that’s what matters. So I want to use well being frameworks. Well, this this hankering for well being as an authorising environment, to start finding some things where wellbeing and GDP deviate the way they were something where there’s a big problem with the well being and GDP is ignorant of it is it’s invisible to GDP, there’s suffering. And I would like to, I would like the well being thinking to start being used to authorise this and I was talking to a state government a treasury, actually, Treasury state government this year, and and I was saying this to them and they said, Well, you Yes, but we need a framework. And I said two things. I mean, firstly, why do you need a framework, it’s not going to help you achieve anything. But I said, I can give you a framework, the framework will be not on how to measure wellbeing everywhere for no apparent reason. But how to build a framework which will deliver wellbeing benefits. And we already have a bit of a, we already have a bit of a picture of that, because we’ve done it conceptually, in another area, which is sort of simpler and more technical, and therefore doesn’t involve the human element so much, and doesn’t therefore engage our feelings in quite the same way. And that is greenhouse. So we have cost curves are very basic, the firt, the first language we ever developed about greenhouse before, even before Kyoto, which I think if I’m correct is 1997, we develop the concept of no regrets measures, what are no regrets measures, they’re things that are good for the economy, and good for greenhouse. And there are quite a lot of those. The classic case of trying to improve the efficiency of at small levels, that management don’t pay a lot of attention to the installation of warehouses and factories, the energy efficiency of electric motors in those things. And they’re actually quite large economic benefits. And they come with greenhouse reductions, and there are still some of those around so I think so the very first thing you go looking for is wellbeing benefits that are no regrets measures, things that have a big impact on the work on wellbeing, while they actually do no harm to the economy. But if that’s the case, is highly likely, given that people who feel good about themselves are more productive and less fractious, and less likely to try and pinch, you know, try and blame other people for their problems and so on. That is that something that could be we could do something very exciting. Now, let me give you a very small illustration, my best illustration of this, it’s actually happening now might have happened earlier, if we’d taken this seriously. In hiring, there is a bit of a craze, you can call it a bit of an ounce, maybe one of the best part best outcroppings of the the woke stuff, which I’m not terribly fond of in lots of guises. But here, if you go to an interview, and you don’t, one way of presenting well you’ll tell most people is you, you aren’t afraid to make eye contact, you make the right amount of eye contact. Well, autistic people find that extremely hard. And autistic people can be extremely productive. So your HR people, the people doing interviews need to be aware of this. And if you’re running an organisation that has lots to do with computer programming, statistics, various kinds of management probably pretty much anywhere, people who who are somewhere on the autism spectrum, not wildly over so that they become socially dysfunctional, but people on the autism spectrum can be if you know that and you manage for that you can massively improve their well being you can massively and you can go do yourself on the productivity benefits that this produce. And so that problem I just mentioned is a large problem. It’s not you know, it might it might affect 234 percent of the population. And it’s in some way, I think, another large problem is that carers, older carers, so I get a bit older and my wife looks after me or vice versa, they tend to be socially isolated. Now Australia has got some quite good policies on this. And we have, we were an early innovator in funding people to go round to older people’s houses and make them a cup of tea, have a chat and then move on or put their dinner on and things like that. But there are lots of things we could do to improve the social connection between carers and of carers and their community and so on. So that’s another area. Another area I would argue would be teaching and probably kids on the autism spectrum, teaching and dyslexia. There are all kinds of things that we don’t manage for these things. Well, well, these things massively depressed, the well being of the particular kids with those with who who have those characteristics. So that’s just a bunch of they’re right at the no regrets area. Yeah. And then I’d like to see some real curiosity about what other kinds of things can we do, which have very low, low short term costs and improve well being. Because a lot of those are actually going to be over any reasonable period of time, no regrets measures, they’re going to contribute to GDP, and they’re going to improve well being. But other than our kind of broad sympathy for such things, you don’t see these types of this type of thinking and those types of initiatives being very high up on the agenda. For in in, for instance, just interact Dan’s wellbeing budget. And if you ask the right question, I will then opine on the well being budget. I just feel I need to give you a word in edgewise.
Gene Tunny 45:51
Okay, okay. Well, I do have a, at least one more question. And but yeah, it would be good to talk about just in the well being budget, too. I was gonna ask, I mean, how are you gonna go about this, but without it being? Like, one of the concerns I have about this whole? Let’s try and, you know, I guess governments have a role of, you know, they’ve got to look after the population, but you don’t, you don’t want it to go too far. Because you don’t I mean, in my view, this is my opinion, you don’t want to reduce the capacity of people to look after themselves. I mean, we should be encouraging Self Reliance to an extent. To what extent does this become paternalism? I mean, how do we do this without public servants becoming busy bodies without interfering too much? How do you go about this? That’s what I’m doing. So I’ll
Nicholas Gruen 46:41
give you an example with Yeah, with I mean, I completely agree. I mean, the idea of public servants fixing that problem, you know, with a hub and spoke model with Canberra bureaucrats or Sydney and Melbourne bureaucrats is just take just take me out and kill me now. What Yeah, this sort of thing is an example I chaired a thing called the Australian Centre for Social Innovation and they have a programme called weavers and weavers is an I call it place base. That’s a term that a lot of people understand. And essentially what it does is there’s a little bit of money there and it engages carers it so it sort of is engaging carers in a local community. A particular care might be my get an honorarium for being a weaver and a weaver will be weaving together, we’ll be running some activities, keeping in touch with local carers, etc, etc, etc, just realising that, because of the circumstances they find themselves in, they need a bit of help and resourcing in maintaining social connection. So it has to be and it’s very cheap. And, you know, and also your some of that money will get wasted, and it won’t work very well and others, it will do terrific things. And it can be, it can provide sort of different kinds of sinews for a community. I’ll give you another example. My wife set up an organisation, my wife and a friend of hers set up an organisation in Seymour called I Wish I’d asked, it was based on it began thinking about oral history. And the idea was to connect school kids and people in aged care homes and older people in the community to record our oral histories. But it turned into a much bigger programme than that. And it was, was it conceived of itself as a multi generational, well be a multi generational anti loneliness programme. They didn’t actually use the word well being. But and it was a, it was a fabulous programme. And I’ll let me just give you an example of because it does go to the connectedness of things. And this is something which maybe we’ll talk a bit more about when we when we look at when we talk about this again. But one of the things that people involved in well being boys talking about is the way things are connected up. And I think so many of those connections are serendipitous, that they’re very difficult to manage for but let me tell you that in Seymour, one of the app camps of this was that young boys so they’re 14, they’re going they’re thinking to themselves, I’m going nowhere, probably they’re not that good at school, their inseam or they’re not quite sure, you know, they’re thinking I might just end up unemployed I don’t really want to end up unemployed and they get in they get involved in this programme. Now some of them are gonna think all people don’t want to talk to old people, and they get in their various the programme have various ways of ensuring that these introductions worked out as well as possible Anyway, they start making friends with these old people. And they saw one autistic kid, we saw an old RSL guy. And they, and the autistic kid became very obsessed with the metals that the old guy or the old guy had. And they talked about these metals and the battles that he’d had every week. Now, that was fantastic for both of them. That is, we’ll be back, let me tell you something else that happened, you know that three of seven or eight boys who were about 14, you know, what they decided they wanted to do for a job. They wanted to work in aged care homes. Wow, you don’t think of young 14 year old boys wanting to do that. But because because we’re brought up in silos. Because, you know, this is reintroducing into the community stuff that existed on its own 80 years ago. And I don’t think, well, I don’t think what happened is that these three kids thought, Oh, I’ve always wanted to do tarot, that’s, that’s me to a tee. I think they thought I can do that. And I won’t be unemployed. And I’ll be useful. And I like these people. And I’ll feel useful. And I’ll have a decent life. And we’re sitting around in Canberra worrying about how do we staff our aged care homes?
Gene Tunny 51:24
That’s a great example.
Nicholas Gruen 51:25
Yeah. So you could justify that. But you could justify this programme, which is run, that wouldn’t cost. It doesn’t cost nothing. But it’s run on the smell of an oily rag, you could use it. I mean, one of the things that the institutions, the aged care homes and the schools, I won’t call them resistant to doing this. But some are. And of course, all of them are subjected to strong regulation, which has been put in place for completely other reasons. So safety checks, police checks, insurance. And it’s not that you want to ignore the issues that those that that regulation is trying to address. But you do want to say that this is a valuable thing. And if it’s getting in the way we want to know about it. And then we want to think about the costs and benefits and whether we can do this in a better kind of way. And so it’s those kinds of things that the the well being agenda, could could address, but really only by making stuff happen and then watching the ripples come out and working out where government’s getting in the way where it can help, generally speaking, not with large amounts of money.
Gene Tunny 52:41
Yeah, yeah, I like that. Good ask what we’re seeing more is that a disadvantaged area in Melbourne as it is
Nicholas Gruen 52:48
pretty disadvantaged, it’s the place where the Australian would furphy comes from see more and further for fees, which have now make money selling their name as a beer, and they give that money to charity. And, and I wish I’d asked picked up some of that money. So shout out to Murphy’s. But so so it’s about 120 My best guess out of Melbourne up north, just getting into Kelly country. And yeah, and it’s where a lot of canned fruit came from, and the firt and the further fees made boilers. And a furphy. In the Australian idiom is what soldiers the story soldiers told, I think this was in Gallipoli, sitting around the boiler and having a cup of tea. I think that’s roughly the story. And that’s where Seymour’s very good learn something.
Gene Tunny 53:41
And I was just thinking that shows the importance of connection and, and connections and important part of well being being connected to family or to friends. And, and that’s, and a lot of people would argue that’s what we’ve lost. We’ve got more people living alone. Yeah. And people just aren’t connected generations as generational divide. Yep. So yeah, I think you’re highlighting that that’s a such a great example of highlighting how you can improve well being with something simple. Now, this might this might have to be the last question for this. This part one of this conversation. You talk about these could be cost effective. This could be low cost is this where something like Andrew Lee’s evaluation unit could be an important part of this story and figuring out okay, we’re spending billions of dollars on these big welfare programmes. And you know, that it could be that it’s better, we’re better off spending a small amount of money on little interventions like this. Yeah,
Nicholas Gruen 54:37
yeah. Yeah. Well, one would hope that some nows about evaluation would enable us to get counterfactual snapshots. I wouldn’t want to say let’s do away with welfare, I would want to say welfare costs us an absolute shedload of money. And for a tiny fraction of that money. We could be doing these kinds of things which are broad health benefits and by health I mean in the broadest sense physical, mental, and community and the health of the community. And we could try to be, I won’t use the word rigorous because that conjures up people with clipboards and bureaucrats, and I just and mathematicians and economists, and I’m not talking about that. I’m talking about trying to be trying to be evidence based, trying to work, trying to notice what works, doubling down on what works and just doing less of what’s not working so well. So I think that’s a great place to finish up. We didn’t get to talk about New Zealand’s well being budget and we can certainly fit that into the next exciting episode.
Gene Tunny 55:42
Excellent. Okay, thank you, Nicholas. Fantastic.
Nicholas Gruen 55:45
thanks very much, Gene.
Gene Tunny 55:47
rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via email@example.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.
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