Monday, January 21, 2013

Change: Can Money Buy Happiness?

Humans are very sensitive to change: When we get a raise or commission, we really enjoy it — but we adapt at incredible speeds to our new wealth.

Some studies have shown that in North America additional income beyond $75,000 a year ceases to impact day-to-day happiness.

“Money has never made man happy, nor will it, there is nothing in its nature to produce happiness. The more of it one has the more one wants,” Ben Franklin — who was born 307 years ago today — is often (mis-)quoted as having proclaimed. 

In asking what you would do if money were no object, Alan Watts echoed Franklin as he advocated for liberating creative purpose from money-work.

Thursday, January 17, 2013

Microfinance and Patriarchy: 'Drifts Away from Serving Women'

Microfinance -- an approach to poverty based on providing small loans and other financial services to poor people, primarily women -- has inspired extensive press coverage, a Nobel Peace Prize for founder Muhammad Yunus and reams of research in the decades that followed the launch of Grameen Bank in 1976.

Much of the research on microfinance focuses on factors associated with the efficient delivery of loans and their effect on borrowers -- in other words, on the financial and economic aspects of the microfinance movement.

But by ignoring microfinance's cultural aspects -- including the influence of patriarchal attitudes on lending practices -- the ability to make loans to the women whom microfinance was originally intended to serve can be seriously restricted, says Wharton management professor Tyler Wry.

Using data on more than 1,800 microfinance institutions (MFIs) in 168 countries compiled by the Microfinance Information Exchange, Wry and Eric Yanfei Zhao from the University of Alberta School of Business look at policies advocated by the United Nations, World Bank and other development agencies that are intended to build stable infrastructures for microfinance institutions.

"We found that countries that do have more liberalised markets, including increased flow of capital and thus the ability to make more loans, also [can] support a lot more microfinance activity, which is good," Wry says.

"But we also found that these same factors that would make a country attractive to MFIs also made it less likely that they would lend to women."

He and Zhao present preliminary findings in a working paper titled, "Culture, Economics, and Cross-National Variation in the Founding and Social Outreach of Microfinance Organizations."

Read the full article here

Wednesday, January 16, 2013

Modafinil and Sleep: A Sociological Speculation

Tyler Cowen at Marginal Revolution is a major proponent of the Great Stagnation thesis: that new innovations are not having the same impact on productivity as those we saw in the previous 150 years.

Think of iPads versus electricity and cloud computing versus the railroad.

Hence, we can expect to see slowing growth in GDP per capita as future productivity gains will take much more effort to unlock.

This week The Economist took up this line of thought with a thorough briefing on the subject that broadly agreed with Cowen, although with some equivocation.

Overall, I think the argument has a lot of merit but there may be at least one more piece of low hanging fruit: a vast reduction in our need for sleep.

The American Time Use survey reports that an average American work day includes 8.8 hours of work and 7.6 hours of sleep.

Sleep is the second largest single use of time. However, new drugs such as Modafinil appear to vastly reduce the need for sleep without significant side effects (at least so far).

Based on reports from users, it seems that people could realistically [edit: potentially (see update)] cut their sleep requirements to as few as 2.5 hours a night without a decrease in mental acuity. That gives us another 5 hours to distribute over the day.

Workers would probably prefer to allocate the bulk of that extra time to leisure but I doubt employers will let that happen.

Let's make a generous breakdown and give work an extra 3 hours and let workers spend another 2 as they wish. This increases working hours by around 34% and potentially increases leisure time by 80%.

This increases the number of hours a worker spends at work from around 1800 hours a year now to about 2,400.

The argument against the use of drugs such as Modafinil, is that a rapid introduction of these pills would amount to an increase in the labour supply and cause a fall in hourly wages or unemployment.

However, it's likely that individuals would generally still see an increase in their overall income and their additional leisure time (2 hours extra) would allow this to be translated into an increase in demand in the economy through increased consumption.

 Overall the transition to a sleepless world seems beneficial to humanity. There's nothing special about the 7 hours of sleep we get right now and I think people would rightly be opposed to a change that made everyone spend an extra hour asleep every day.


  • I've never used Modafinil. This is because I don't know where to buy it, I have some moral qualms about using it when the rest of the world is not and because it is still a bit early to conclude that there are no long term health effects; 
  • Some people I've talked to have raised the issue of environmental damage. I think the total environmental impact of a sleepless world could be positive or negative but surely the damage would be lower per unit of output (because there are a lot of fixed carbon outputs per work day such as commuting and building overheads). At the very least, a sleepless world looks like a more environmentally friendly growth strategy; 
  • This argument is premised on the safety of these drugs. Clearly the calculus will change if they are shown to have negative long term consequences; 
  • For those people who already work long hours with little sleep, these drugs should at least make that lifestyle less dangerous. There is convincing evidence that chronic lack of sleep is harmful in normal circumstances; 
  • The precise amount of sleep that a Modafinil user can get by with seems to vary but all sources I've seen suggest it is dramatically lower; 
  • The short term costs of a rapid change might be substantial so gradual adoption is probably preferable from the standpoint of welfare.

Real the full article here