I CAN HAZ MIDDLE AGE? (NO)

The last two rounds of elections in Greece were, more than anything else, about one of my favourate subjects: age and the battle of generations. 

Older voters, with their pensions to protect, came out in force for the former major parties, fearing that more radical choices would put our bailout at risk; younger voters, many of them unemployed and with little to look forward to anyway, came out in force for the (occasionally radical) left and some even for the far right. 

The cut-off point used by most media outlets to illustrate this was the age of 50 or 55. That, to me, is a happy coincidence.

You see, in January 2012, the Eurobarometer wonks published a survey of European attitudes towards ageing, which asked people, among other things, at what age they thought a person ceases to be ‘young’ and at what age they thought a person begins to be ‘old’.  

Greece was, as it often is, an extreme case: on average, Greeks considered people to be ‘young’ up to the age of 50.5. We were beaten only by Cyprus on this account.

While youth seems eternal in Greece, old age is not particularly long. The threshold for ‘old’ age was 65.7, which is quite typical within Europe – and it suggests an expected 14.4 years between the threshold of ‘old age’ and the average Greek’s life expectancy - also close to the average. 

Between these periods of ‘youth’ and ‘old age’ is an implied 'middle age' – and due to our long period of ‘youth’ in Greece it lasts for just 15.4 years. Only the Hungarians, who count people as old from the age of 58 onwards, had a shorter middle age.

I tried to calculate one last crucial interval: the average duration of retirement in middle age. This measures the amount of time that people can expect to spend in retirement while still not being considered old. I suspect this is an implied target in industrial relations – in a perfect world, one would retire still young enough to not be held back by ill health or a weakened body.

Germany is unique in this regard in that the Germans are the only Europeans to work into what they perceive as old age - about two and a half years of old age. Only the Turks and Hungarians come close, but both nations tend to retire before reaching their subjective 'old age' threshold. The Netherlands, France and Belgium are at the other extreme, with new pensioners looking forward to at least 11 years of ‘middle age’ left. Greece is more in line with accession countries in the Baltics in this regard, with workers looking forward to only about 4 years of middle age after retirement.

I need to explain at this point that this is not a core versus periphery narrative. The longest implied middle age in Europe occurs in fellow PIIG Portugal, and at 31.1 years it lasts twice as long as Greece’s. Sweden follows with 29.7, while the typical German has about 22 years’ worth of middle age to look forward to – not far from the European average. Even middle age in retirement, which sounds like a political choice, is not a clear cut core/periphery issue.

I do, however, think that culture matters, so I ran a quick test using Hofstede's cultural dimensions and any other data I could get my hands on. The Eurobarometer study hinted that a country's median age might matter when defining the thresholds of middle and old age: growing old makes people more lenient when it comes to defining youth and old age. 

My tests revealed this to be true with regards to the old age threshold but not the middle-age one. Still, every year added to a country's median age pushes the threshold of old age further out by just over 10 months. On the other hand, it is the expected  duration of a working life that makes the difference to the middle-age threshold - short expected working lives prolong perceived youth by delaying emancipation, and this time there are no diminishing returns. In fact, every year of lost working life delays the onset of subjective middle age by a year and half. 

Just as interestingly, more 'macho' or masculine cultures tended to be associated with shorter periods of youth and an earlier onset of subjective old age. To avoid confusion, Hofstede defines 'masculinity' as

a preference in society for achievement, heroism, assertiveness and material reward for success. Society at large is more competitive. Its opposite, femininity, stands for a preference for cooperation, modesty, caring for the weak and quality of life. Society at large is more consensus-oriented.

By celebrating 'heroic' and assertive attitudes, as well as the ability to provide for one's family, masculine cultures tend to shove people into middle age and old age quicker.

In the case of Greece, a combination of very delayed emancipation and a persistent masculine culture leads to a shrinking middle age - which would be just a curiosity among many except for what I think is a significant cultural and psychological effect. Middle age is the time when one has no excuses and expects no one to clean up after them. For countries, a shrinking middle age may be a shrinking field of accountability.

Worse, I think the pressure one is subjected to when forced to cope with delayed emancipation and macho expectations at once is a breeding ground for monsters. The link between cultural masculinity and violence is echoed in studies of family killers and 'honour' killings. It could even explain why Greece's increase in suicide ideation has been mostly among men, especially married ones.  But I hope to return to this point at a later date. 

Notes on the data

The Eurostat study does not provide life expectancy or working life expectancy estimates, or indeed cultural attitude estimates. I have I used median age and life expectancy data from the UN, here, extrapolating the figure for 2012 from the estimates for 2010 and 2015. I’ve also got average retirement ages from here and Hofstede culture dimensions data from here.

As for average working lives, I’m using expected working life durations at 15 and there are two sets of recent estimates to choose from. (Economix 2009) was commissioned by the EC and can be seen here. Hytti & Valaste (2009) can be seen here. I’ve gone for Hytti & Valaste but Economix is about two years more up to date. Either way, differences between the two are small.

YOU SHALL NOT HAZ!

Dear readers,

I've waited a long time for a juicy academic paper to come along that discusses the state and prospects of the Greek economy and have come up with the occasional gem now and then. But I think I found a real good one the other night.

Through this discussion on VoxEU.com, I became aware of a new working paper by Matthias Traband of the Fed (yuk!) Board of Governors and Harald Uhlig of the University of Chicago which tries to answer a very fundamental question: how much can sovereigns tax before they reach their maximum tax take?

This question is based on the Laffer Curve hypothesis: if zero effective tax rates produce no government revenue, and 100% effective tax rates also produce no government revenue (as all economic activity ceases), then there must be a point in between where the economy is taxed as much as it possibly can be; further increases in headline tax rates will simply reduce the government's tax take by providing disincentives towards work and investment. I know many readers on the Left will resent the idea of the Laffer curve: filthy neoliberals telling them what they can and cannot do, as though the world were not infinitely malleable to their political preoccupations! And true enough the Laffer curve is hardly as fixed and stable as it looks on a blackboard. Today's Laffer curve is tomorrow's laughingstock.

But the core insight is undeniable - no government anywhere in the world taxes its citizens and businesses above a certain point, as they implicitly know that beyond a certain point they will only end up hurting themselves.

Anyway, I strongly urge you to read the Traband and Uhlig paper, as it specifically calculates two core variables to any future model of the Greek economy - the maximum sustainable interest rate and the maximum sustainable tax take. As p. 26 indicates, the highest interest rate Greece could have sustained back in 2009 was 7.4%. I'm pegging this to 2009, as the 2010 calibration uses 2009 figures and is therefore completely useless in our case. This indicates that, although the Greek state is insolvent, the actual interest rate imposed by our creditors is currently just about sustainable. More importantly, the highest amount by which we could sustainably increase tax revenues to GDP compared to 2009 was 4.8%, on top of the 37.9% we were getting in 2009 - so essentially 42.7%.

This is important because the tax revenues assumed by the IMF's debt sustainability report  are 41% of GDP - a sustainable figure as it turns out. However, it also means that, barring a fundamental shift in the structure of the Greek economy, 42.7% is the maximum amount of primary government spending we can sustain. It's the limit to the size of the state.

How do we get there is the question. Traband and Uhlig show that taxing capital alone can only provide an additional 2.4% of GDP and take us to 40.3%. Taxing labour alone would only provide 4.4% of GDP and take us to 42.3%, which is sustainable but sub-optimal. Whatever happens, we'll have to rely more on labour taxes than capital taxes. And whatever happens, it's simply not possible for the Greek state to sustainably grow to more than that 42.7% of GDP. People should bear a realistic calibration of the Laffer curve in mind before they make comparisons between Greece and other European countries - the argument is often made that the Greek state is not too big, given that the EU average for government spending is higher than ours. The simple answer is, that's their Laffer Curve; not ours.

In the words of LOL-Gandalf, YOU SHALL NOT HAZ!

SUSTAINABILITY EPIC FAIL

The most dedicated of readers may remember this post from our more innocent pre-bailout times, when I noted:

We in Greece do not have to choose between socialism and climate change denial - we believe in nothing and can therefore disbelieve whatever we like.

This was the story of our Minister for Climate Change being told off by our energy unions in a remarkably sub-human way for not being too keen on Brown Coal – our ‘national fuel’ apparently.

Well, she’s in trouble again. She’s come up with an outrageous idea was that it should be illegal to build outside residential zones if they have been included in the Natura programme for the preservation of pristine animal habitats.

Predictably, half the Socialist party pounced on her, citing over-sensitive regulation that will finish off our struggling construction sector, whose output is down 21% from the last year.  This strikes me as odd – construction is down because people don’t have money to invest, because house prices are falling and because banks won’t lend as easily. When demand is the problem, deregulation doesn’t really provide much by way of stimulus. Right?

Even more hilarious is the manner, once again, in which the Minister’s suggestion was dismissed. Giannis Vouros, yet another actor-cum-politician popping his greasy locks above the parapet these days, was hilariously quoted as saying:

'This ecology stuff is all very nice but it should not be allowed to turn into eco-fetishism. We can’t expect [people to] sit and think oh where are the pelicans going to be laying their eggs, and derail an entire development plan’

Even so, my friends.

This is a dilemma for me because I find the case for protecting animal habitats compelling. On the face of it, it is much easier to do this if there are clear land use regulations in place. However, I also believe that the less power the Government has, the better. I’ll suspend judgement until we’ve considered the evidence. I haven’t followed very much of that with regards to degradation of animal habitats, but I know a little about the deforestation literature, which works in a similar way.

The evidence suggests that an area is much more likely to be deforested if the level of prosperity of its inhabitants is high, or if the area is mostly agricultural. This is corroborated by evidence that arson is more likely when GDP per capita rises and fuel and wheat prices increase.

Here’s the trick though: the evidence suggests demand for urban and rural living space did not lead to deforestation. Demand for quality, expensive dwellings, however, did. We know because deforestation grows with GDP per capita but not urban demand and because housing booms correlate with deforestation. If the same holds for habitat destruction, it would explain why the Socialist MPs (rightly) point out that regulation will hit construction – because they are referring to demand from well-to-do citizens who have not been affected by the recession.

Of course, structure also matters. The municipal and public ownership of peri-urban forest certainly made it easier to reclassify for other uses (this is important because illegal land use is not very strongly correlated with deforestation), not least by allowing corrupt officials to facilitate the process. On the other hand, deforestation tended to go down as the number of hotel beds increased. Tourists don’t like fires or wastelands and hoteliers don’t like losing money.

So who’s eating up our forests? Subsidised farmers and demand for land by rich folks – through deforestation and arson. How do we keep them from doing this? By making each forest someone’s livelihood (if you can’t stomach making it someone’s property, which I understand), saying no to farm subsidies and of course fighting corruption at the local level.

Now I wonder if the natura habitats can be protected in a similar way.

WE IZ IN UR PUBLIC UTILITIEZ, BEING STUPID

We in Greece do not have to choose between socialism and climate change denial - we believe in nothing and can therefore disbelieve whatever we like.

But even so, we had yet to see anything quite as masterful as the recent letter to the Greek minister for Climate Change, signed by the Association of Graduate Technicians at Greece's Public Electricity Company (ΔΕΗ).

If you're not Greek and you don't know what the company's initials stand for, you may assume that this is a professional body of energy technicians. In fact they are a union whose sole purpose is to ensure that the gap in pay and benefits between those of ΔΕΗ's employees who have a technical university degree and those who do not remains as large as possible.

What they believe their role to be is evident from the following LOLpic which they have used in the latest of their military inspired newsletters  Hint for non-Greeks: the guy on the right, holding up a card that reads "harsh [fiscal] measures" is EU Commissioner for Economic and Financial Affairs Joaquín Almunia. The "300" reference is as laughable as it is obvious.

What is truly remarkable, however, is the content of the letter itself. I am pleased to offer a small selection of passages, whose profound absurdity is all the more obvious in translation. Quotation marks are not inserted by myself - they are part of the masterpiece that is the original text.

These "cabbage-green" homunculi (cabbage-green for their ecological concerns) who pompously style themselves "Head of Policy at the WWF" (leader of the troops), or "Head of Energy Matters at Greenpeace", should know, if they do not already, that Greece has enjoyed 60-odd years of energy security and cheap energy on a KWH basis, thanks to ΔΕΗ, which has made and continues to make the most efficient use of our national fuel, brown coal [lignite].

[...]

This environment stuff is all very nice, and we agree with the development of renewable energy sources and the "20-20-20" targets for 2020.

[Note: this refers to the European Commission target for sourcing 20% of EU member states' energy from renewables and reducing carbon emissions by 20%, compared to 1990 levels, by 2020]

We will support any initiative of yours aimed at a larger ΔΕΗ with brown coal, our national fuel, as its main fuel.

We agree with your rock-chick coutoure and your wealth of "knowledge"

[...]

We are well-versed in hard rock and, when in the right, we can quickly acquire Ph.D.s in Street Studies.

[Note: In Greece, "Hard Rock" is an archaic byword for confrontational politics. Ph.D. in Street Studies is a reference to the new Minister's university studies as well as a hint that the Union is willing to employ aggressive industrial action]

CARBON REDUCTION FAIL, BUDGETING FAIL, TRANSPARENCY FAIL

WWF says the Greek delegation in Copenhagen was more than 70-strong, counting scientists and NGOs

In its early formative days, however, the delegation was sized at ca. 30 by our own officials, again counting various hangers-on:

Even one of our naysaying politicians on the Right only had the figure at 69.

Now I would not be willing to bet that anybody flying to Copenhagen paid their own way, so we must at least have the receipts. Apparently some stayed for more than two weeks.

All of this makes the Greek delegation bigger than that of the UK (but not as big as that of newly enviro-sceptic Australia). For a country with few domestic carbon reductions and no development money to offer, not to mention GINORMOUS AMOUNTS OF DEBT, one cannot help but wonder what we were thinking.

But of course, one thing did come out of it. The holy grail of political PR in 2009: the Obama photo-op.

I CAN HAZ CARBON TAX?

PLZ... I NO HAS TAX REVENUZ.