Synthetic happiness

If someone said you could ‘manufacture’ utility (or the ‘happiness’ gained from consuming a good) without actually consuming it, would you believe them? If all of us had this ability, what would happen to the global economy?

Psychologist Dan Gilbert talks about synthetic happiness, and how paraplegics and lottery winners can both become equally happy after a set time. He also describes a series of experiments based on how being given a reversible choice can dramatically change our happiness levels, and provides evidence on how all of us can manufacture happiness.

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Pushing it too far?

It’s common knowledge that the Hong Kong property market is one of the most heated up ones in the world, despite the recent slump, and in 2016, the 13-year cycle of this market is expected to peak. The rental yield at 2.7% remains higher than the mortgage rate at 2% – providing support. While China’s recent stock market crash stirred a debate, a significant number of well – known investors feel that since housing is a long-term investment, market volatility will not greatly affect it. But that’s a whole other debate.

The scarcity of land in Hong Kong is a pressing issue for the CEO, Leung Chun-ying, and his government. Their solution? Land reclamation in tiny Victoria Harbour. Since the 1850s, more than 60 square kilometers of land has been reclaimed, and with ongoing discussion of a third runway for Hong Kong International Airport, the will to reclaim land doesn’t seem to be swayed by the dozens of petitions signed by the Society for Protection of the Harbour or the various other organisations who have tried to stop this from happening. Their arguments include the risk of losing the white Chinese dolphin and irreversible marine pollution. A few others believe that ‘the shortage of housing is real but that is because of the deliberate manipulation of the governement’, i.e a lot of land is tied up in the vast land banks of private developers that the government conveniently fails to notice.

The opportunity cost to saving the dolphins and the harbour? Only the 50% of the Hong Kong population struggling to buy a house, an extra 200,000 flights a year, and the possibility of the property market skyrocketing in the near future. A simple 126 hectare project has the potential to house 115,000 people, but small projects like these are being shut down due to the lobbying of NGOs such as Greenpeace. The economics of the property market are simple – a short supply and exceedingly high demand leading to exorbidant prices. The government’s position is clear – the shortage of land is directly linked to a sharp decrease in land reclamation – and this has to be solved through pouring more concrete into the harbour day by day.

It’s all a game of conscience – would you struggle to afford a house or allow clear blue water to turn into a murky brown, but rest peacefully into a home that doesn’t tear apart your pocket?

Economics always wins!

Stephen Hawkins recently said “We cannot quite know what will happen if a machine exceeds our own intelligence, so we can’t know if we’ll be infinitely helped by it, or ignored by it and sidelined, or conceivably destroyed by it”. Humans need not apply

If we take the positive perspective and assume that AI will aid humans and that we are smart lazy beings, what will we do when the “bots” takeover the world?

Do you live to work or rather do you work to live?

 

Bottoms up!

social entrepreneurs

Tl;DR (too long; didn’t read): Introduce the importance of inclusive growth at more fundamental levels instead of hoping for a trickle down affect to occur.

A recent article on the world economic forum coming from the social entrepreneurs delegation about how leaders should tackle problems of equality and drive inclusive growth was published. Directions and strategies to accomplish such goals include only three:

  • Make inclusive growth an explicit part of your agenda
  • Infuse your executive teams with a “can do” attitude
  • Contribute your core expertise and assets

This is a direction in the right step but to me it seems all lacking.

The social entrepreneurs delegation is directing this at leaders most of them CEOs. While targeting the private sector is effective, should it really be for those at the top? The CEOs that attended the conference in Davos were those who were willing to take steps in the right direction but they are far and few. While other absent companies may be working towards the same goals, I believe that such efforts which are directed to the ones at the top may be effective but progress will most likely be minuscule in the grand scale of things. Too many economic participants may fail to see the benefits of inclusive growth which is more sustainable than other forms of economic growth. If we are to boost the general standard of living it is more favourable for more equality though such should not be forced by government intervention otherwise it could lead to unnatural and unstable circumstances should a government decide to change it’s policy. In other words, inclusive growth should be driven by private individuals as it is more likely that such actions will spread quicker than if it were by government intervention simply due to the fact that more people will realise the benefits than if it were imposed.

Besides my laissez-faire rant, how can we go about achieving this. As I said this article is targeting those in leadership positions who have been in the game for a large amount of time. But will their attitudes and efforts trickle down fast enough? I do not think so.

The best solution in my opinion is to introduce these concepts into the education of economics. If they were to be included in the syllabi of schools and universities then surely these ideas would be more prevalent within society therefore more efforts to achieve inclusive growth are likely to be undertake. For such a concept that is being pushed by the social entrepreneurs delegation instead of targeting the CEOs, they should focus on schools and universities that teach economics at a higher level as well as raising awareness through publicly friendly  lingo where such theories and strategies will be more accessible. Only then would inclusive growth would be pushed at a faster rate. That is not to say that the previous efforts are in vain but what the latter would act as a catalyst to ensure that there will be more efforts for inclusive growth.

Disclaimer: I am no expert in economics or advertising, these are ideas which I thought of while sitting on the toilet.

Trade Blocs

Check this out for a better explanation of the types of trade blocs. At about the 1:05 mark, is where the types are discussed with increasing scale of integration, i.e. from Preferential Trade Agreements to Economic Union to Full Integration.

Don’t put all your eggs in one basket

China’s policy makers have recently set about trying to curb China’s rapid economic growth. They’re calling it the ‘new normal’. They are essentially not implementing short-term growth stimuli in response to fluctuations in the economy (for example, they are limiting tax breaks). Now, I’m not going to go into what this means for China but instead look at our friend Laurence Harris in the UK.

Laurence is a Welsh farmer who supplies milk to Pret-a-Manger chains in Hong Kong. He has not as yet begun to feel the impact of China’s slowdown, however, analysts predict it will soon hit exporters like him. This is on account of the 7.4% drop in China’s growth. The Chinese government is tightening its grip on spending and the ‘new normal’ will soon see falling demand affecting the Laurences of the world. Larger multinationals like Unilever and Ben & Jerry’s have already begun to feel the brunt of the ‘new normal’ after reporting a 20% fall in their sales in the last quarter of 2014.

The British marine industry, in particular, has been hit pretty hard; it’s sales having dropped from 71m in 2012 to 52m in 2013 to 34m in 2014. This is, in part, due to the volatility of the industry – you don’t exactly see people running out and buying a powerboat every other day; it’s usually only the Donald Trumps of the world that go out and buy one, maybe one in every harbour city in his case, but you get the idea: it’s a one-time buy sort of good. However, the drop in Chinese economic momentum has also played a significant part. Not only has the fall in demand seen a fall in sales, but it creates uncertainty – exporters are unable to predict and plan how much stock to move. This places increased pressure on factors like employment and storage/ holding costs.

Companies like Alucast, however, haven’t been hit as badly and here’s why. They spread their operations over a number of different countries. They have operations in the US, Hungary, Romania, China. It increases their security and reduces the chance of them being catastrophically hit on account of Xi Jinping’s decisions over in China. Globalisation has its perks but it also has its weaknesses, and dangerously high interdependence is one of them. So, the moral of the story? Don’t put all your eggs in one basket.