Will pricier soda lead to slimmer waistlines?

Policies that can be set in motion with little more than the stroke of a pen can be very seductive. That’s particularly true with policies that appear to have the same hue as some major social problem, since lawmakers can use that problem as a rationale for the policy, and hope that no one thinks too hard about whether it’s logical to expect the policy to effectively address the problem.

Such is arguably what we’ve seen recently in the heated debate about universal basic income (UBI), and now it we are seeing it with the proposed sugar tax.

Though it may have some other benefits (e.g., capturing externalities of obesity), the sugar tax is often defended on the basis that there are a lot of obese people in modern-day Australia – including children – and many Australians take in far more sugar than health guidelines recommend, much of it in the form of sugary drinks. Hence, or so the argument goes, if we make those drinks more expensive through imposing a sugar tax, then people will buy less of them and obesity rates will dutifully start to fall.

As parents, we can make sugary drinks harder for our kids to access by not buying a lot of them in the first place. Schools too have choices about what to stock in canteens, and how to arrange and price food so that healthier things are within easier reach. A tax on sugary drinks also makes them less accessible, especially for cash-constrained people, and therefore may well reduce the consumption of those drinks – as has been seen in Mexico.

But are sugary drinks really the underlying cause of obesity? History shows us that sugary drinks have been around far longer than the modern obesity epidemic, which began in select developed countries around the late 1980s and early 1990s. Why were we able to resist the soda on the shelves for generations before the 1980s, after which we suddenly started succumbing to large quantities in the past generation? On the basis of layperson logic alone, sugary drinks cannot be the primary cause of the catastrophic rise in obesity we’ve seen in the internet age.

Evidence suggests that sugary drinks are more likely to be bought regularly by people in the lower income brackets of our society. Why then do lower-income adults buy large quantities of sugary drinks for themselves or their children? Are they ignorant of sugar’s health effects? Sadomasochistic? Trying to select the least-cost beverage option (water) but misfiring due to plain stupidity?

An alternative theory is that the reason for the initial kick-off in obesity rates, and some of the reason they’ve stayed high, is psychological. Evidence suggests that being lower-income can cause negative pressure on people’s self-esteem. The stress of being poor may have worsened as inequality has increased, and/or with the advent of globalized media, which provides access to unlimited stories about beautiful superstars to whom it’s very difficult for most real people to measure up. If modern lower-income Australians are already finding life pretty mentally exhausting, then they may not have the surplus mental strength required to resist buying unhealthy things (sugary drinks included) that will taste nice, and that their family and friends will enjoy and thank them for.

To the extent that obese people make poor food purchase decisions for psychological reasons, a tax on sugary drinks will do little to help them lose weight.

Slippery slipping standards

Attention has recently been drawn, yet again, to the spectre of falling skills standards in Australia. This time, several commentators from inside and outside academia have picked up on a newly-released report by the Australian Industry group claiming that employers are loudly complaining about their workers’ literacy and numeracy skills.

The AIG report contains the results of an employer survey – termed the Survey of Workforce Development Needs – in which employers could flag one or more of a number of possible problems that were being `affected’ by a lack of literacy and numeracy. Some 42% of respondents flagged the problem of `poor completion of workplace documents / reports’, and several other problems got votes of over 20% (`teamwork / communication problems’, `material wastage / material errors / non-compliance’, and `time wasting’).

The AIG report also shows the position of Australia relative to peer nations on the OECD’s `Survey of Adult Skills‘ for both literacy and numeracy, and proceeds to ring the following alarm bell: `It is clear that a major literacy and numeracy problem persists in the general population and the workforce.’

Sounds pretty bad, doesn’t it?

Around the merry-go-round…again

There is a strong element of deja vu about this. The fear that Australia is turning out a next generation that is under-prepared to succeed in the global economy is a perennial public hot button, because it calls into question the potency of the country on the world stage.

Heated conversations (e.g., here, here, here, and here) over the past several years about NAPLAN, teacher training, bureaucratic incentives, classroom management, monolingualism, the Gonski program and so on have demonstrated the public concern for the quality of education in our country.

Concerns about slipping standards in higher education have also been a popular theme in recent times, with fingers pointed at university incentives, student cheating, international students, and university governance.

These discussions have pointed to myriad possible ways we could try to improve the education provided to students studying in Australia, from primary school to university. But did all of these previous discussions miss something big that the new AIG report unearths?

The AIG Report

Let’s consider exactly what the AIG report is saying. The focal question posed of employers is as follows (lifted from here):

Is you business affected by any of the following problems due to a lack of literacy and numeracy skills? Check any that apply
Poor completion of workplace documents / reports
Time wasting
Potential for workplace injuries or unsafe work practices
Material wastage / material errors / non-compliance
Staff lack confidence / unwilling to take on new work
Financial miscalculations
Recruitment difficulties
Teamwork problems / communication problems

Leaving aside the grammatical error in the question itself, the `problem areas’ listed have been significantly widened compared with the analogous `problem areas’ listed in the previous version of the report, reproduced below:

Inadequate completion of workplace documents or reports
Time wasting
Material wastage
Staff unable/unwilling to take on new work
Staff lack confidence
Financial miscalculations
Recruitment difficulties
Ineffective work teams
Not applicable

Far fewer `yes’ boxes were ticked in this previous (2012) survey. The shock 42% of employers complaining about errors in document preparation in the most recent results was only half that size in the prior survey’s results. Was there a true 100% increase over three years in employer-reported document and report completion problems laid at the feet of poor basic skills? It seems more likely that fewer employers would agree that employee skill problems caused `inadequate completion’ than that they caused `poor completion’, because `inadequate’ is a subset of `poor’.

The report also does not make explicit where the `over 90%’ scare figure comes from that is picked up here. Further, while declaiming about the poor state of basic adult literacy and numeracy demonstrated in the OECD survey data, the reports fails to mention that Australia is actually ranked fifth best – between Sweden and Norway – in the OECD adult literacy league table, and only just below average (slightly above Canada) in adult numeracy. We may be bad, but then so are our friends it seems, at least on these measures.

More broadly, the AIG as an institution has every incentive to design surveys so as to highlight workforce problems for which industry cannot be blamed. Doing this successfully makes it easier for the AIG to lobby for more money to be spent on government programs to fix those problems, whether they are argued to be the fault of schools or poor (dare one say inadequate?) subsidies for post-school training programs.

And, exactly in line with these incentives, calls for more money for training programs (`national provision of foundation skills programs in the workplace’) feature prominently in the AIG report’s conclusions.

What’s news?

If the facts here broadly consist of old wine in new and somewhat leaky barrels, then what can we take away from the AIG’s investigations of workplace skills?

What this report makes me wonder is where exactly our literacy and numeracy skill inadequacies, to whatever degree they exist, are coming from. From a long-term policy standpoint, there are two distinguishable sources: inadequate formal education, or inadequate training for workers who did not attend formal education in Australia.

If the problem is the former, then Australians’ robust discussions around how to improve school and university performance, some of which are linked to above, are hitting the source of the problem on the head. We should be experimenting with different mechanisms, from meritocratic teacher compensation to flipped classrooms to foreign-language immersion from kindergarten to university governance shake-ups, with the goal of isolating a few potent levers and them implementing them on a broader scale. The policymaker concerned with getting everyone over minimum thresholds in basic literacy and numeracy before they enter the workforce should focus particularly on innovations that can be implemented in failing schools, rural schools, and those that serve disadvantaged populations and children whose first language is not English.

If, however, the problem is inadequate basic skills of people arriving here after their formal education has been completed, then a very different long-term policy prescription would be written. One would then want to see more government investment into cultural assimilation programs, English training programs, and workplace numeracy programs – much more in line with what the AIG report’s writers call for. Countries that welcome immigrants who do not possess the skills to succeed in their new country, yet are not offered affordable and accessible training in those skills, do so at their peril.

Is this a description of Australia?  While the AIG report writers did not disaggregate their results by type of respondent (schooled abroad or schooled in Australia), they could contribute more to the public dialog on this question by doing so in the next iteration of their survey – while keeping their focal survey questions identical across waves.  It may be considered un-PC to ask directly whether Australia-raised or overseas-raised residents are more under-skilled, but it is arguably bad for the country – and for all its residents – not to ask it.  Without good data, one cannot design good policy.

Universities, corruption, and standards: It’s not just academic anymore

Australia as a whole seems finally to be taking serious notice of the sorts of trends that some of us academic economists have been rattling the chain about for years in regard to academic standards, university corruption, and international students.

ABC Four Corners will be airing a show entitled “Degrees of Deception” on Monday evening that will feature interviews with many academics, including myself and Paul Frijters, another frequent poster to this board.  You can view the trailer for the show here and written teaser here.

The New South Wales Independent Commission Against Corruption (ICAC) has issued a report summarized in the media release here acknowledging the potential for corruption and falling standards in the higher education sector as a result of universities’ dependence on international students for revenue.

Particularly after the MyMaster scandal broke last year, there has been increasing coverage of these matters elsewhere in the popular press (e.g., here and here), and editors at The Australian tell me they are putting together a lead article on the topic for publication on Monday.

Will this be enough to generate the political will to address these problems in Australian higher education systematically, competently, and with independent oversight?

What does the Public Interest Disclosure say?

Those following the exploding story about Paul Frijters’ research on racism and UQ’s subsequent reaction to it might wonder, as I did: what exactly is in the “public interest disclosure” referred to in media reports (e.g., http://www.theguardian.com/australia-news/2015/feb/27/university-suppressed-study-into-racism-on-buses-and-victimised-its-co-author)?

To satisfy your curiosity, I’ve written below a summary brief of the core allegations included in that disclosure, based on my reading of it over the weekend.

The bird’s eye view is that the PID alleges maladministration, particularly on the part of one particular university administrator, in regard to the handling of research misconduct allegations that were lodged against Paul Frijters after the initial media buzz over his and Redzo Mujcic’s findings in their racism study. These findings were contained in a UQ press release in March 2013. Frijters judged in the middle of 2014 that a disclosure of this alleged maladministration was in the public interest due to its having led to “substantial adverse effects” (quoting from the PID). The PID, released publicly 6 months later (i.e., last week), does not directly allege maladministration by other members of the UQ hierarchy but leaves open the real possibility that such maladministration could have occurred, and/or that others may have been complicit in the maladministration of the one administrator.

To determine whether UQ personnel followed UQ procedures when handling the misconduct case against Frijters, we need to know what UQ procedures actually were.  Here is a flow chart showing the UQ procedures for managing a Research Misconduct allegation (this flowchart apparently was, but no longer appears to be, posted on the UQ website: https://ppl.app.uq.edu.au/content/research-misconduct-procedures):


The main errors that allegedly have been committed are:
1 – Using the wrong personnel to conduct the initial Investigation. The supervisor (together with a “Designated Person”) is supposed to conduct the initial Investigation, according to UQ policy. But Frijters’ supervisor was not part of the team that conducted the initial Investigation.
2 – Using the wrong process and the wrong lines of authority to take the matter to the next level. After the initial Investigation, the CEO (DVC Research) should have been notified of its outcome, so s/he could decide whether to take matters further (meaning, to open an Inquiry through the issue of a Notice of Allegations) or, instead, to refer the matter back to Frijters’ supervisor. But a Notice of Allegations was issued by someone other than the DVC Research, who also was not Frijters’ supervisor. Around this time Frijters also learned that he now has a new “special supervisor”, a move that may go against the stipulations of the Enterprise Bargaining Agreement.
3 – Willful disregard of an external report by an ethics expert. At this point in the investigations, U Melbourne Associate Professor Andrew Crowden prepared an external report in which he – according to the PID – “pointed out that there was no proper Research Misconduct procedure being followed; that the process being followed was incompatible with the NHMRC guidelines on research misconduct; and that there in fact was no good case to argue research misconduct at all.” This report was made available to the university administration but was apparently ignored.
4 – A circus of incompetence and gross delays in taking action when challenged. Upon Frijters appealing the decision to issue a Notice of Allegations, based on the procedural unfairness witnessed to that point in the investigations, the university’s lawyers referred the matter to a Committee of Review. This Committee apparently did not hold any hearings to consider the alleged procedural violations, but merely referred the procedural matters back to the university, which in turn referred them back to its lawyers. Months later, the allegations against Frijters were finally dropped.
5 – Using the wrong personnel and the wrong timing to order the retraction of research. According to UQ’s procedures, an order to retract research in a case of suspected research misconduct can only be made after an Inquiry, and must be issued by the DVC Research. In this case, a retraction order was issued before any inquiry, and that retraction was not issued by the DVC Research.

The reason for all of these errors to fall into the lap of one particular university administrator is that it is apparently that administrator’s role to be the custodian of the Misconduct Procedure. According to the PID, this administrator was made fully aware of each of the above erroneous steps in this case, and took no action to correct any of them.

Criminal researchers?

Joshua Gans asked yesterday whether UQ suppressed the Mujcic/Frijters working paper on racism. In the comments to that piece, the possibility has been raised implicitly that the paper might have been suppressed because its authors employed unethical or illegal tactics in conducting their research.

Two main concerns are raised. Let’s take them in turn.

First, the question of whether the method required “fare evasion”:

“the study seems to require agents of the researchers to commit a crime (riding without a valid ticket) and also is designed to prompt the study’s subjects (the bus drivers) into complicity in that crime and perhaps the crime of defrauding the public revenue.” ( – Jeremy Gans)

The study does not require fare evasion:  what actually happened in any given instance was entirely up to the bus driver, who was the one who made the call on whether to let the research assistant ride for free.  Was the “prompt” of the RA’s statement putting inordinate pressure – however defined – on bus drivers to do the wrong thing?  Let’s not fool ourselves into thinking that the type of situation that the researchers created isn’t a regular occurrence on buses. People are human, and they will sometimes board a bus with an empty travel card in-hand. In the study, the RAs did not even ask the driver for a free ride: they said they had no money and wanted to get to station X. That is a direct and open admission of inability to pay, combined with a simple expression of desire. If making that statement equates to trying to evade a fare, then we have a lot of criminals in our midst. Is the Brisbane bus authority now going to go after every one of us who ever boarded a bus without loading enough money on our travel card, and then stated the facts of the matter out loud? Is the Brisbane bus authority going to go after every bus driver who ever took pity on an elderly lady or a harried mother of small children who obviously didn’t have enough money?  (See also Mike’s response to Joshua’s original post.)

Concern 2: is it illegal to “dress up in a military uniform to try and exploit bus drivers’ sense of patriotism”?  What happened in the Mujcic/Frijters design is that camouflage costumes were hired from a costume shop and some of the RAs wore them onto the buses. Here’s a photo of the costume we are talking about:

camouflage outfit

If we think that hiring and wearing such a costume in public should be illegal – because, for example, it constitutes impersonation of military officers, or something like that – then we should ban such costumes from the market, or make a rule that those who hire them must heed a warning like “Do Not Wear In Public”.

How much restriction on our individual freedom of expression, including our expression of common decency toward fellow citizens having a hard time, are we willing to accept in our society in order to save the face of big organizations like the Brisbane bus authority?



Abstraction, identity, and modern violence: Je suis [your abstraction here]

The spate of `Islamist’ violence recently perpetrated by individual people is a puzzle for mainstream economics. In the world of rational agents intent on maximizing their wealth, the destruction of human or material resources is only sensible when that destruction provides a direct competitive advantage. Why then would Homo Economicus walk into an office, market, or cafe, and start destroying the productive resources belonging to economic entities that are not in economic competition with him? Because this behaviour just doesn’t square with mainstream economic models, economists have not taken it upon themselves to explain it.

Yet there are direct economic effects of this destructive behaviour (e.g., loss of valuable human capital, inventories, and so on), and also the effects created by a loss of security: economic activity in the affected regions may temporarily wane or at least shift in terms of industry mix (more personal bodyguards, less tourism to national icons). Drawing a box around public destruction of this sort and saying `economists don’t get this!’ will only limit the ability of economics to accomplish its core mission of helping societies move to their highest-welfare frontier. The more human behaviour we claim flummoxes us, the more we are at the mercy of our models being trumped by `exogenous shocks’ – the economists’ version of the doctor’s `idiopathic condition’ (`I don’t know what’s wrong with you, but clearly it’s something!’).

What then is happening? The people who have engaged in this violence are not stealing resources or killing competitors. They seem motivated by a desire to protect something very different than their personal livelihood. `Defending the Prophet’, `punishing <entity X> for its insults against <entity Y>’, and similar abstract ideas are typically claimed as at least proximate motivations, despite the fact that the extremism of the destruction wrought is of the sort typically observed in developed societies only in situations where one’s own personal safety is in grave danger and there is no recourse but to violence.

The first step in understanding this is to understand that in the mind of the perpetrator, he IS the abstraction. Let’s take the motivation of `defending the Prophet’ as an example. A person claims that he engages in the destruction of human and material resources in order to defend the honour of someone who is long-dead and thus certainly not in a position to repay the favour, even if we accept the premise that the entity for whom the act is committed would perceive it as a favour. The perpetrator of violence is devoted strongly enough to whatever it is that this long-dead entity represents in his mind (e.g., `the honour of Islam’) that he will kill someone whom he has perceived to have insulted the entity. He is what we would call `loyal’ to this entity – just as a soldier in a national army is motivated to kill on the battlefield because of his loyalty to the abstract concept of `his country’ and everything that his country stands for in his mind.  In his mind, his self includes the entity:  hence, a threat to the entity is a threat to the self.

Now, plenty of us regular Joes living in today’s peaceful nation states hold entities in our minds with which we similarly identify, and to which we are similarly devoted. For me, what my children represent in my mind best fits this description. If someone came to my house and posed a clear and present danger to the physical welfare of my children, then I would certainly fight him and if necessary kill him. But if someone drew a cartoon making fun of my children, said very rude things about them to their faces, or even publicly humiliated them, then would I quietly obtain an assault rifle and put a bullet in him? No. And why not? For two reasons.

First, no one in a position of power over me would condone or encourage such an act. It would be considered by all groups to which I belong to be shameful, weak, and altogether unacceptable. If I murdered someone in cold blood, I would lose my professional status, my networks, and my personal friends: I would become a pariah. It would just be super-dumb from the perspective of my own personal advancement.

Second, my identification with and hence devotion to other abstractions is more powerful in my mind than my devotion to protecting my children from humiliation. Those other abstractions—things like peace, tolerance, love, and understanding—would be directly insulted by murder. As a result, by murdering someone in retaliation for ridiculing something I hold precious, I would lose respect for myself. Balancing my devotion to protecting my children from humiliation against my devotion to these abstractions, there is simply no contest. Any child of mine, I would tell myself, should be strong enough to withstand, learn from, and ultimately prove wrong any insults or other rude behaviour. I would of course comfort and staunchly support an insulted child, but taking lives because of a non-violent insult? It would simply never cross my mind.

I venture that the previous few paragraphs resonate with most readers who have been raised in the developed world by peaceful, reasonably well-off parents and who are lucky enough today to enjoy status and friendships that they value. How is the internal world of the terrorist different?

First, he is encouraged in his destructive act by others who lead him to believe that his own status will rise when he commits the act. This means he sees the act as a way to advance himself personally. Unlike me, he either does not have, or does not value as highly as I do, personal respect from peace-loving groups. Hence he does not internally perceive that he has (as much of) this respect to lose.

Second, the other abstractions with which I strongly identify, and which pull my behaviour away from violence, are not ones with which he identifies as strongly. The perpetrator’s devotion to `the honour of The Prophet’ and what this represents in his mind is simply stronger than his devotion to `peace’ or `tolerance’. The natural explanation for this is that he was not conditioned in the way most people in the developed world are as children. While in my childhood I was told repeatedly by parents, teachers, and other figures of authority that killing people was unconditionally wrong, he may have somehow escaped that strong conditioning and built his identity at least partly using the building blocks of other abstractions, such as honour or domination, for example. Alternatively, he may have grown up with a weak sense of self, not being encouraged to identify with powerful peaceful abstractions, making him the easy prey when a young adult of any group that understands how conditioning works. This could be seen as a failure of parenting, and/or a failure of the state in which he was raised to infuse his education with the peaceful values that are conducive to economic prosperity. Events like the march yesterday in Paris, however, are prime evidence of the depth of identification with peaceful values that is present in the hearts of people in modern developed countries – and hence of the broad success of modern conditioning efforts.

The internal world of the terrorist, like the internal world of most of us, is hence driven by his identification with abstractions. This world is built through socially-mediated encouragement towards that identification. Our remarkable ability to abstract, and then to identify with the abstractions we conjure such that they expand our sense of who we are and strongly influence our behavior, is something uniquely human. We owe to it the wild success of our nation states, and even the basic ability to imagine and plan for our future economic activities, so it is fundamental to the workings of our modern economies. It is also a trait that enables the de-railing of people who escape modern conditioning systems and can subsequently become instruments of terror.

Some argue that even if one of these `Islamist terrorists’ had been under the influence of violence-promoting entities for some time, he should `wake up’ and censor himself once he realizes what he is being asked to do. As we know from the stories of Nazi camp soldiers, however, this is not easy. In the face of a powerful group telling him that killing will be rewarded – a group that has strongly encouraged him to identify with an abstraction, and then fed him the story that that abstraction has been damaged by people whom he holds the power to kill – and with weak pre-existing personal commitment to peaceful abstractions that might counter that message, the young man is a sitting duck. There but for his conditioning goes my own son.

The upshot for economists? Our definition of individual rationality is implicitly conditional upon the prior conditioning of the individual in question. Not only cold material realities, but the abstractions we identify with internally, exert a powerful influence on our economically-relevant actions.

When we make ourselves desperate

As economists, it’s easy to for us to argue that our models account more than those of any other social science for the fundamental importance of need satisfaction in creating healthy societies. The pursuit of his own need satisfaction is at the heart of our model of the individual economic agent; when the economy is functioning well, supported by all these greedy little agents, it creates the most “pie” possible from which all can partake.

Yet we are not quite so good at predicting what happens when some members of the population do not get their basic needs met. Minimum amounts of food, water, shelter, warmth, sex, social acceptance and self-esteem are things that we and most of those we see around us in our privileged societies are lucky enough to be able to take for granted.  Even a lack of some of these things that cripples some of our citizens does not, in aggregate, sum up to enough pain to cripple our whole societies.  But the reality on the ground for large segments of the population in less-developed regions of the world is that their basic needs are not met, even for years at a time.  What does this do to a society’s ability to develop a stable, functioning economy?

My colleague Paul Frijters, just back from an anthropological jaunt in central Asia, suggests that withholding sexual access from young men through repressive social conventions is an effective way to produce enough desperation to derail “normal” economic pursuits.  One might immediately envision a short-term policy response of setting up full-service, low-cost brothels in areas where polygamy is widespread. The many problems with this include security, political feasibility, and the incompleteness of the solution:  those with many wives, who control local administration, will not like to see their exclusive rights duplicated for others; nor will the clients of such brothels find a path to what they are ultimately looking for.

How else might we work against the social production of such crippling desperation?