ECON 3235 Happiness matters, but so does eco footprint? HW #2 v5 (last revision) Fall 2019 See BB for due date, please add you name to the file name and if possible, insert in it the footer below… The Happy Planet Index (HPI) not only highlights some of advantages and vulnerabilities of Latin American countries, happiness, health and inequality are all imports (as is GDP per person and corruption). Where is your country doing well compared to its peers (in Latin America). The Easterlin paradox enters the pictures because both the WHI and the HPI create some unlikely clusters of countries. Eventually one could use some of these results in your case study presentation, but we cannot do everything this week. If you can make a picture as I did below but if it is not easy please just write a sentence like this one, “For example, Costa Rica’s cluster for the 2018 WHI includes Austria (83%) Ireland (125%) and Germany (84%). Here the numbers in parentheses is their countries per capita GDP per person in comparable $2011 PPP prices. Compare to Costa Rica whose income is 28% that of the U.S. This illustrates an often observed but surprising between income and happiness known as the Easterlin Paradox (where income no longer buys the happiness it once did. Thanks to an overworked UK NGO we can also bring a very timely eco-footprint into the picture. Countries like Costa Rica (and Mexico, Colombia, Panama and Ecuador) live well with a modest eco-footprint (moreover ten of the World top 21 HPI countries are in Latin America (Peru is number 21...). LDQ 2.0 (preliminaries) In an excellent 2014 survey of social development indicators, Venezuelan economist Sary Levy-Carciente and her colleagues identify three clusters of LatAm countries, each with one outlier economy. Interestingly, none of us chose one an “outlier” country: Cuba, Costa Rica or Nicaragua. Last year we did two out of these three. 2.0A) Which of the three clusters does your country really fits into this group. Briefly, what are the identifying characteristics of this group or cluster? [AH] Later you can decide whether your country fits into this group, for now just write them down (Cluster 2 is large so perhaps not that helpful…). The three clusters appear on page 100-102, wow a Dendogram… 2.0B) Note the sardonic title: if you are not making progress try happiness (small is beautiful... ). Easterlin’s paradox is too obvious to mention, immediately (page 73) we learn everyone knows “that economic growth does not necessarily lead to social development” [or democracy] “and that rapid economic expansion in a given country does not guarantee happiness or an increase in social wellbeing for its people..” Starting on page 75, we have a long list of social development indicators, narrowed to a lucky 13 indicators shown in Table 1, on page 95 or in your hand and at the end of this HW pdf. Fortunately, the Happy Planet Index (HPI) makes the cut. But note most Transparency International indices did not make the cut, which one do they use? [AH] The CPI or the BPI, the GDP, the NIS or the GCR (please write out the names of these indices and note that Professor Levy-Carciente is one of the founders of the Property Rights Alliance, Peruvian economist Hernando de Soto is President. Note that when they wrote this article Hugo Chavez was still President of Venezuela…2.0C) Who urged economists to come up with a broader measure (see Page 90). [AH] EC; what is a Dendogram? [AH] LDQ 2.1 Create a cluster of 3-4 countries using the 2018 ro 2019 World Happiness Index (WPI) In the spirit of the Easterlin paradox check to see if your case study country is happier than expected give its income (as is the famous outlier Costa Rica, see Figure 2.1.1 whose 2018 Happiness cluster includes Austria (83% of U.S. income) Ireland (125% or U.S. income) and Germany (84% of U.S. income). [AH] Getting by on just 28% of U.S. average income of (averaging $55k in $2011 PPP pricesTable A-2 for WEO data for all countries from the April 2019 WEO, to be updated mid-October. Costa Ricans is seems are happy as residents of Israel, or Austria or Ireland all of whom have much higher incomes (but not the beaches or ziplines?). Costa Ricans live better than we do on less than a 1/3 of our income. This is a paradox (though we have been warned that Costa Rica is outlier, its cluster includes Uruguay and Chile…see LDQ 2.0 above). At some point you may want a Figure 2.1.1 for your case study, but right now just focus on your countries cluster and compare the incomes (we the same pattern even for Honduras, one of poorest countries in LatAm) Your Name here Econ 3235 HW#2 v5 24-Sep-19 Table 2.1.1 World Happiness Cluster for Costa Rica Source Sachs et al. (2018) LDQ 2.2) In Chapter 6 of the 2018 World Happiness Report Professor Mariano Rojas argues “Latin Americans report high happiness levels. Positive-affect scores are substantially high both in comparison to other countries in the world and to what income levels in the region would predict. Latin Americans’ evaluation of life is also above what income levels would predict. It is clear that there is more to life than income and that there is something to learn from the Latin American case about the drivers of happiness (page 166, WHR 2018). What does Rojas mean “Positive-affect scores” and overall life evaluation (LE) refer to [AH] (see Rojas Chapter 6 Figure 6.1 which shows Costa Rica LE score of 7.2 is above the West European LE of 6.95 and just below the “Anglo Saxon” LE score of 7.38, even w/o adjusting for income. [AH] You may have your own theories of why Latin Americans are happy, but do summarize Rojas’s views with a page number or quote from Chapter 6 (or wherever you find his views) LDQ 2.3 Now create country clusters using the Happy Planet Index for 2016 [Costa Rica is #1 on this index is for the World and for Latin America and it is an outlier, w/o peer, see Lisa Gale Garrogues’ article in Yes Magazine article on how the do it. Lets do an HPI clusters for Honduras. Its LatAm peers are shown below HND is below Haiti but above Paraguay and Bolivia. Use the four HPI components Honduras ranked lower than Haiti but higher that Paraguay and Bolivia, why? [AH] Use the HPI briefing pdf or their web page briefly summarize how inequality and health and corruption are measured (we will discuss the footprint later…) [AH] http://happyplanetindex.org/about Table 2.1.2 Honduras’ 2016 Happy Planet index Cluster (LatAm only) Source: Jeffrey et al, 2016 HPI Briefing paper appendix Table 2.1.2 is the global HPI cluster for Honduras, including the Czech Rep, Turkey & Hungary all countries we think of as middle income (they are 44% and 51% of U.S. income see WEO table A-2) The Czech Republic is 60% of U.S. per capita GDP vs. a mere 8.3% for Honduras… (Ethiopia At 4% of U.S. GDP Ethiopia is one of the poorest countries in the world, ½ the income of HND but its very light footprint give it a comparable HPI to HND (buy Ethiopian coffee!!) The HPI reminds us that poor countries near the tropics have a very light ecological footprint… even as they are among the most vulnerable to climate change (so unfair!!) Low carbon lifestyles dictated by poverty are not to be idealized (more on this later) Ethiopia (and Rwanda) happen to be on Your Name here Econ 3235 HW#2 v5 24-Sep-19 a 15 year growth run, they could well overtake Honduras. [AH] Please cut and paste these two Figures or just summarize the relevant rankings and HPI indicators for your country (this is a good question to ask in class) Your task for LDQ 2.3 then is just to cut and paste similar clusters for your country, if it is too time consuming to cut & paste Tables like these, just list the HPI and per capita income (and perhaps the red, yellow and green flags for your cluster countries… we can do the Tables later (Honduras is doing, thank you for taking HND it is a very important country, the largest sender of immigrants this year. [AH] Table 2.1.2 Honduras’ 2016 140 country Global Happy Planet Cluster Source: Jeffrey et al, 2016 HPI Briefing paper appendix LDQ 2.4 Speaking of GDP per person 2.4A) Which LatAm economy does the IMF estimate grew the most and which the least from 2016 to 2019 and what was the % change? [AH] For example, Argentine income shrank by about 4% while Costa Rica’s GDP per capita rose by 5-6% according to Table A-2. Shockingly a revised July forecasts Venezeula’s GDP will fall by 48% the worst contraction I have ever seen, anywhere 2.4B) Speaking of GDP why Ireland’s GDP per person 25% higher than that of the United States? Similarly, why do Honduras, El Salvador and Guatemala have much higher GNP than GDP (as does the Dominican Republic…)[AH]. This is an interesting cluster of countries, with the DR taking the outlier role of Costa Rica (which means rich coast as Max is a witness).