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Create a happy new year; give shares, not pay rises; and the human side of free trade.

Create a happy new year

Edit Edit date and timeA government that was more focused on "well-being creation" than wealth creation would not only be a better government, it would likely be a more cost-effective one too, says Andrew Clark and co-authors on the CEPR think tank's Vox blog. But we need numbers.

In European elections since the 1970s, life satisfaction scores asking people how satisfied they were with their lives on a scale of 0 to 10 have been a better predictor of whether the government gets reelected than economic growth, unemployment or inflation. That is what governments should measure, then figure out how to improve. Our study shows that the big factors are all non-economic, having to do with such things as whether you have a partner, and how healthy you are. Less than 1% of the variance in life satisfaction can be explained by income inequality, even among the very poorest. Dealing with mental illness is one of the most important tasks it explains more of the misery in a community than physical illness, and more than poverty and unemployment. If we could abolish depression and anxiety, it would reduce misery by as much as if we could abolish all of poverty, unemployment and the worst physical disease. It is also the cheapest problem to deal with. Similar reasoning applies to efforts to improve the emotional well-being of children, especially at school. This is a more important determinant of future well-being than the exams they pass.

Give shares, not pay rises

All the talk in the West is of disunited societies, widening inequality, the "left behind" and their rage against the establishment. But what is to be done? Perhaps it's time to revive an old idea, says David Howell on A method of making capitalism work for all was put forward half a century ago by the American visionary Louis Kelso. He proposed schemes for wider capital ownership through employee share-ownership schemes. This would give workers a solid share in the capitalist economy, and would heal divisions between employers and employees, as well as reduce the pressure for higher wages. It would also make people feel we were all in it together not left behind and trying to catch up.

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His scheme for making this possible went untried for many decades. The world had other worries. But now the time is ripe. The alternative could be a lot more alienation and populist anger and the withering away of democracy.

The human side of free trade

Free trade is on the run, says Russ Roberts on his Medium blog. Donald Trump wants to scrap trade deals. The death spiral of manufacturing in the US thanks to trade with China has made many wonder whether free trade was ever such a good idea. To see that it is, consider the following. Imagine a scientist invents a pill that allows you to live to 120 with no health issues whatever, and proposes to sell it for $10. Should we let him? It seems like good news for everyone. But it's going to be very hard on some. Doctors, nurses, administrators, construction workers building hospitals, teachers in medical schools, pharmaceutical researchers, and so on. What will happen to all these millions of people? Mass unemployment. Their incomes will plummet overnight. Nevertheless, for all that, we all just got much wealthier. All the money poured into healthcare can now be spent on other things. All those people working in it will have to turn their minds and energies to other tasks. And we're all going to live longer and healthier lives.

If the pill is an import from China, the basic point is not affected. Trade and innovation amount to the same thing: doing more for less. That makes us all better off. What about those unemployed workers? They'll need more than a cheque from welfare in the long term. To be happy, they'll need to be able to take advantage of new opportunities and that means education. Our schools must broaden their scope and prepare people for life, not just exams. Schools should be places where we go to figure out what we like to do. Ultimately, human flourishing is all that matters.