Saturday, September 18, 2010

the marshmallow test

Discipline is the price of freedom.
In the late 1960s, a Stanford psychology professor left a succession of 4-year-olds in a room with a bell and a marshmallow. If they rang the bell, he would come back and they could eat the marshmallow. If, however, they didn't ring the bell and waited for him to come back on his own, they could then have two marshmallows. Film of the kids showed some of them squirming, hiding their eyes, or turning around so that they couldn't see the marshmallow. Some of them ate the marshmallow immediately. Others rang the bell within a minute. About 30% delayed gratification for the full 15 minutes that passed before the researcher returned.

Years later the researcher, Walter Mischel, suspected from stories he had heard about the subjects later in life that there was a relationship between waiting for the second marshmallow and future academic performance. In the 1980s Mischel sent out questionnaires to all the reachable parents, teachers, and academic advisers of the 653 subjects who had participated in the marshmallow experiment, who by then were in high school. He found that the child who could wait fifteen minutes had a SAT score that was, on average, 210 points higher than that of the kid who waited only thirty seconds. Researchers continued to track the subjects into their late 30s and also found that low-delaying adults were more likely to be overweight and more likely to have had problems with drugs.

The implications of what has become known as the "marshmallow test" are significant. As cerebral conservative pundit David Brooks has observed, "[i]f you're a policymaker and you are not talking about core psychological traits such as delayed gratification skills, then you're just dancing around with proxy issues." Yet earlier this week when Brooks lamented the current state of America - "The nation is overconsuming and underinnovating" - he saw many self-described political conservatives as part of the problem: "[i]f Republicans decide that even the smallest tax increases put us on the road to serfdom... the country will careen toward bankruptcy."

Some time ago a commentator responded to my flogging of the HST issue to state that conservative opposition to the HST "has nothing to do with the merits of HST and everything to do with restraining the growth in government." If, with no small indulgence, we were to assume that the HST reform were not revenue neutral but a revenue raiser, the difference between the enacting the reform and not enacting is still not the difference between big government and small but but between big government and big government with a deficit.

The "starve the beast" doctrine has been discredited by the record of self-identified conservative governments in office. Early last year, Andrew Coyne noted that, in Canada,
[Our "conservative" government has put us] on course toward a massive and permanent increase in the size and scope of government: record spending, sky-high borrowing, and—ultimately, inevitably—higher taxes. And all this before the first of the baby boomers have had a chance to retire.
Since 2000, federal spending per Canadian in inflation-adjusted dollars has risen more than a third. The US government has also hardly been the picture of restraint these past ten years, despite Republicans controlling all of the House, Senate, and Presidency for much of the decade.

I'll repeat the point for emphasis: smaller government is realized by smaller government, not lower taxes. Cut taxes, in particular consumption taxes, and all that one has done is move total consumption, private and public, forward in time, the exact opposite of what is, or was, understood to constitute fiscal discipline.

There is, in fact, nothing particularly magical about China's meteoric growth. The country's consumption/investment ratio is massively skewed towards investment relatively to "the West." And the Chinese government understands this, which is why the currency is deliberately undervalued: consumption is more expensive (imported consumer goods cost more) while investment is cheaper (demand for the exports produced by more property, plant, and equipment is higher). A cheap yuan is a transfer from Chinese consumers to Chinese producers, the very business-friendly move that invites the hostility that drives opposition to the GST/HST in Canada and provides popular support for the USA's sky-high corporate tax rates in combination with low or no value-added taxes.

Fortunately, many Americans are alive to the fiscal reality that their government is in. A Deficit Commission has been proposed and designed to be as politically unaccountable as politically possible, since otherwise its recommendations would be watered down if not outright ignored. Republican Senate leader Mitch McConnell (left) was an outspoken proponent of the Conrad-Gregg deficit commission ("We must address the issue of entitlement spending now before it is too late. As I have said many times before, the best way to address the crisis is the Conrad-Gregg proposal...")... until it came time to actually vote on it. McConnell's excuse? "Our problems are not a result of taxing too little, but of spending too much." As Fred Hiatt noted at the time, McConnell "was happy to claim fiscal responsibility while beating up Obama for fiscal recklessness. But when Obama endorsed the idea... and when the commission actually, against all odds, had the wisp of a chance of winning the needed 60 Senate votes - McConnell bailed." The incident is but an example of how efforts to avert the public's gaze from the marshmallow by moving a policy decision a step back from the immediacy of electoral review are typically denounced most loudly and ferociously by populist self-identified conservatives.

Earlier this week the Tea Party was celebrating in Delaware, as Congressman and former Governor Mike Castle lost the Republican Senate nomination to Christine O'Donnell. Charles Krauthammer called Sarah Palin's endorsement of O'Donnell "reckless and irresponsible," while Delaware GOP chairman Tom Ross observed, "I could buy a parrot and train it to say, ‘tax cuts,’ but at the end of the day, it’s still a parrot, not a conservative." EJ Dionne at the Washington Post dubbed Ross' remark his "favorite line of this election season" and I agree: at issue here is a hijacking of the conservative label to reduce it to self-indulgent tax cuts. Back in 2002 and 2003, when a group of influential self-styled conservatives advanced the argument that invading Iraq would usher in an age of peace and harmony to the Middle East, most observers at least recognized this sort of thinking as so far from the traditional "conservative epistemology" - i.e. skepticism about grand claims that state action will bring about a better, more liberal world - that they at least assigned the prefix "neo-" to these "conservatives." Today, a person wanting to buy a Ferrari, and wanting it now, can stand up and demand a tax break on his indulgence (it's invariably a call for a personal tax break as opposed to a break for business in general) and somehow get unqualified trademark rights to "conservative." North American society as whole has flunked the marshmallow test and, in the wake of a fiscal crisis precipitated by debt-financed over-consumption, has responded by looking around for an authority figure to blame, as if the consumer debt friendly policies that exacerbated the problem were not the result of office-holders being over-responsive to the demands of the electorate.

It was not that long ago that Jane Austen's books were back in vogue, as North Americans alienated by the culture of consumption were stirred to feelings of, dare I say it, conservative nostalgia. As Mr Knightley advised, "There is one thing, Emma, which a man can always do, if he chooses, and that is, his duty; not by maneuvering and finessing, but by vigour and resolution." The concept of duty, to entities above and beyond oneself, like the next generation, was once a fundamentally conservative value. It could be again.
Men are free when they are obeying some deep, inward voice of religious belief. Obeying from within. Men are free when they belong to a living, organic, believing community, active in fulfilling some unfulfilled, perhaps unrealised purpose. Not when they are escaping to some wild west. The most unfree souls go west, and shout of freedom. Men are freest when they are most unconscious of freedom. The shout is a rattling of chains, always was.
- DH Lawrence


Anonymous said...

My personal favorite politician right now I have to admit is fairly obscure choice but Prime Minister John Key of New Zealand just happens to have the highest approval rating of any OECD head of government. What is interesting Key who was elected just weeks after Barack Obama most signature economic accomplishment to date has been raising New Zealand's GST from 12% to 15% and cutting corporate and personal income taxes across the board, take that Bill Vander Zalm. The top bracket personal income tax rate in New Zealand is now 33% one of the lowest in the entire world. Key has signalled that in the medium term he would like New Zealand to have the same tax rates as Hong Kong and Singapore. I will also note the New Zealand has no capital gains tax and its GST is very strict and doesn't have some of the exemptions for "basic necessities" that Canada's and Australia's do. What is interesting is just across the Tasman the Australian government has launched a "comprehensive" tax review commission however, the government has specifically instructed it to make no recommendations regarding the rate of GST, currently 9% in Australia.

I do have to say from watching videos of such as the ones I have linked below Key seems to be far more comfortable in his own skin than many politicians I watch. Key had worked for many years at Merrill Lynch as its head of foreign exchange in both Singapore and London. (In the American context it would be impossible for someone with that many ties to Wall Street to be elected dog catcher) I also noticed that all a lot of the Youtube videos the National(Conservative) Party of New Zealand posts are not just of Key but also of other cabinet ministers and backbench MP's

Overview of economic conditions and policy changes in New Zealand by Finance Minister Bill English

Anonymous said...

On the subject of interviews of politicans I have to say the time Stephen Harper went on Larry Kudlow's show on CNBC in the US has to be one of the freakiest most interesting of all of Harper's media appearances ever.

Harper just seems so much more relaxed and enjoying than he does in Question period or interviews on Canadian tv. I admit Kudlow's question were softball given his lack of knowledge of Canada however, Harper did legitimately at the time have a positive story to tell that few in Canada I think truely understand.