Wellbeing, living standards, and their Wellbeing, living standards, - PowerPoint PPT Presentation

Wellbeing, living standards, and their Wellbeing, living standards, and their distribution distribution David Gruen Executive Director, Macroeconomic Group 9 September 2011

Australian Treasury’s wellbeing framework Australian Treasury’s wellbeing framework Distribution Sustainability y Set of opportunities Risk Complexity Complexity

New Zealand Treasury’s framework New Zealand Treasury’s framework New Zealand Treasury s framework New Zealand Treasury s framework Where normative approaches ask what the distribution Where normative approaches ask what the distribution of living standards should be, positive approaches ask of living standards should be, positive approaches ask what the distribution is what the distribution is Th what the distribution is. They also consider whether there is what the distribution is. They also consider whether there is Th l l id id h th h th th th i i evidence to suggest that a particular distribution poses social or economic evidence to suggest that a particular distribution poses social or economic problems and the effect different policy interventions may have on how problems and the effect different policy interventions may have on how living standards are distributed. living standards are distributed. li i li i t t d d d d di t ib t d di t ib t d Treasury takes a positive approach to distribution as Treasury takes a positive approach to distribution as opposed to a normative, value opposed to a normative, value- d t d t ti ti l l -based one b b based one . d d . This approach is This approach is appropriate to Treasury’s policy advisory role, as it allows the organisation appropriate to Treasury’s policy advisory role, as it allows the organisation to provide advice on the distributional priorities of the government of the to provide advice on the distributional priorities of the government of the day, while maintaining an apolitical position that is grounded in empirical day, while maintaining an apolitical position that is grounded in empirical economic analysis. economic analysis. New Zealand Treasury (2011), ‘Working Towards Higher Living Standards for New Zealanders’, New Zealand Treasury Paper 11/02, p. 27

Implicit judgements in measures Implicit judgements in measures p p j j g g  Distribution among Distribution among whom whom  Distribution of  Distrib tion of Distribution of what Distrib tion of what hat hat  Distributional  Distributional Distributional concern or rule Distributional concern or rule concern or rule concern or rule

Disconnect between measures and policy Disconnect between measures and policy p p y y  The The what what is measured too narrowly is measured too narrowly  Disconnect between the measures and the  Disconnect between the measures and the Disconnect between the measures and the Disconnect between the measures and the reasons we are concerned about distribution reasons we are concerned about distribution  Disconnect between the measures and Disconnect between the measures and common ideas of fairness common ideas of fairness common ideas of fairness common ideas of fairness

Sen’s capability approach Sen’s capability approach p p y y pp pp Resources Capabilities Utility or income or income (functionings) (functionings)

What is fairer? What is fairer? Jane has baked 6 pies to give to her two Jane has baked 6 pies to give to her two friends, Ann and Betty, who do not know each friends, Ann and Betty, who do not know each other. Betty enjoys pie twice as much as Ann. other. Betty enjoys pie twice as much as Ann. In distributing the pies, what is fairer: In distributing the pies, what is fairer: A. A. 2 pies to Ann and 4 to Betty, or A 2 pies to Ann and 4 to Betty or 2 pies to Ann and 4 to Betty or 2 pies to Ann and 4 to Betty, or B. B. 4 pies to Ann and 2 to Betty; or B. B. 4 pies to Ann and 2 to Betty; or 4 pies to Ann and 2 to Betty; or 4 pies to Ann and 2 to Betty; or C. C. 3 pies each? 3 pies each? Konow 2003 Konow 2003

What is fairer? What is fairer? Jane has baked 6 pies to give to her two Jane has baked 6 pies to give to her two friends, Ann and Betty, who do not know each friends, Ann and Betty, who do not know each other. Betty enjoys pie twice as much as Ann. other. Betty enjoys pie twice as much as Ann. In distributing the pies, what is fairer: In distributing the pies, what is fairer: A 2 pies to Ann and 4 to Betty or A. A.2 pies to Ann and 4 to Betty, or 2 pies to Ann and 4 to Betty, or 2 pies to Ann and 4 to Betty or 40% 40% 40% 40% B. B. B.4 pies to Ann and 2 to Betty; or B.4 pies to Ann and 2 to Betty; or 4 pies to Ann and 2 to Betty; or 4 pies to Ann and 2 to Betty; or 4% 4% 4% 4% C. C.3 pies each? 3 pies each? 56% 56% Konow 2003 Konow 2003

Konow’s Konow’s fairness principles fairness principles p p p p  N  Need, N Need, concerning basic needs d d concerning basic needs i i b b i i d d  Equity  Equity Equity (or desert) concerning proportionality Equity (or desert), concerning proportionality (or desert) concerning proportionality (or desert), concerning proportionality and individual responsibility and individual responsibility  Efficiency, Efficiency, concerning maximising outcomes concerning maximising outcomes

The Australian Treasury perspective on The Australian Treasury perspective on distribution distribution distribution distribution  The The distribution distribution of opportunities across the of opportunities across the Australian people. In particular, that all Australian people. In particular, that all Australians have the opportunity to lead a Australians have the opportunity to lead a fulfilling life and participate meaningfully in fulfilling life and participate meaningfully in society. society. i i

Wellbeing, living standards, and their Wellbeing, living standards, and their distribution distribution David Gruen Executive Director, Macroeconomic Group 22 June 2011

Treasury’s mission Treasury’s mission y  The Treasury’s mission is The Treasury’s mission is to improve the wellbeing of to improve the wellbeing of the Australian people by providing sound and timely th the Australian people th A A t t li li l l by providing sound and timely b b idi idi d d d ti d ti l l advice to the government, based on objective and advice to the government, based on objective and thorough analysis thorough analysis of options, and by assisting the thorough analysis thorough analysis of options and by assisting the of options and by assisting the of options, and by assisting the Treasury ministers in the administration of their Treasury ministers in the administration of their responsibilities and the implementation of government responsibilities and the implementation of government decisions. decisions.