Saturday, February 25, 2017

Is a fixed mindset more realistic than a growth mindset?

Before I got far into Carol Dweck’s book, Mindset, I was confronted by the thought that the author might classify me as having a fixed mindset rather than a growth mindset. Dr Dweck is an eminent psychologist who has conducted a great deal of research on mindsets. She suggests that if you believe that your intelligence “is something very basic about you that you can’t change very much” you have a fixed mindset, but if you believe that you “can always change how intelligent you are” you have a growth mindset.

In considering those propositions (along with a couple of other similar ones) my mind turned initially to research showing that for most people IQ tends to remain fairly stable throughout life. That must mean that existing IQ is a good predictor of future IQ. If you choose an individual at random it would be safe to bet that their IQ is not likely to change much. 

However, after a few moments I realized that I was adopting what I call a spectator mindset. I was considering the relevant literature like a spectator who is not personally involved. I had overlooked the fact that the author was asking whether I agreed with certain beliefs about the potential for my intelligence to change.

When I began to think from a personal perspective, books by Norman Doidge on brain plasticity came to mind. From a personal viewpoint, I think it makes sense to view your intellectual capacity in much the same light as your physical fitness. Your brain is like a muscle – use it to make it strong. Or, at my age, if you don’t use it you lose it!

As I read further into the book I discovered that, like many other people, I alternate between fixed and growth mindsets.

I was induced to read Mindset, by an article by Nela Canovic on the Quora site where people were discussing the most important thing they have learned in life. The article got me wondering how closely Carol Dweck’s distinction between fixed and growth mindsets corresponds to the distinction between spectator and player mindsets that enabled me to greatly improve one aspect of my life about 14 years ago. It makes sense for a spectator to focus on what she or he expects to happen, but to be successful at anything you need a player mindset – to focus on your intentions. That is one of the most important things I had learned from life. (I have recently written about it on this blog.)

My concern in this post is with the realism of different mindsets because I don’t think it serves us well to maintain delusions about ourselves.  As I see it, human flourishing depends, to a large extent, on realism – seeking understanding about important aspects of your own life and human life in general, and being disposed to act on that understanding when circumstances permit. As previously discussed on this blog, that view has been reinforced by my reading of Wellbeing: Happiness in a Worthwhile Life, by Neera Badhwar, a philosopher.

As I see it, fixed and growth mindsets must both be closely related to the meanings that people give to their experiences, and how those meanings or interpretations shape their intentions and future behaviour. Is a growth mindset more realistic than a fixed mindset?

Carol Dweck suggests that the fixed mindset – the belief that your qualities are carved in stone – “creates an urgency to prove yourself over and over”. She adds:
“If you have only a certain amount of intelligence, a certain personality, and a certain moral character – well, then you’d better prove that you have a healthy dose of them. It simply wouldn’t do to look or feel deficient in these most basic characteristics”.

The book emphasises is that this mindset gives people one consuming goal – proving themselves: “Every situation calls for a confirmation of their intelligence, personality, or character”. In this mindset people tend to avoid coming to terms with reality if reality doesn’t validate their views of their own qualities.

What about the people who have a fixed mindset which involves labelling themselves as stupid, erratic, neurotic, lacking in willpower, or manifesting some other quality associated with poor performance? The author doesn’t give much attention to the potential for people to develop fixed mindsets which involve labelling themselves as poor performers. That could be because she sees fixed mindsets as stemming largely from attempts by parents and teachers to boost the self-esteem of children by telling them how clever they are, and so forth.

In her discussion of willpower, the author’s main emphasis is on the potential for people who believe they have strong willpower to fall into the trap of firmly resolving to do something, then failing to act according to their intentions because they make no special efforts to do so. She doesn’t mention that people who have come to label themselves as lacking in willpower might give up making resolutions to do things that could improve their lives. Perhaps that point is too obvious.

When I went looking in the book for recognition of the potential for people with fixed mindsets to label themselves as poor performers, I did find some. For example, there is recognition of this in the author’s discussion of the higher incidence of depression among students with fixed mindsets, and in her discussion of the learning potential of inner-city children who have been labelled as retarded or emotionally disturbed. The author also writes:
People tell me they start to catch themselves when they are in the throes of the fixed mindset – passing up the chance for learning, feeling labelled by a failure, or getting discouraged when something requires a lot of effort. And then they switch themselves into the growth mindset …”.

Carol Dweck explains:
The growth mindset is based on the belief that your basic qualities are things you can cultivate through your efforts. Although people may differ in every which way – in their initial talents and aptitudes, interests, or temperaments – everyone can change and grow through application and experience”.
The author refrains from making unrealistic claims about what can be achieved with a growth mindset. She suggests that people with a growth mindset don’t believe that with proper motivation and education anyone can become an Einstein or a Beethoven. They believe that “a person’s true potential is unknown (and unknowable); that it is impossible to foresee what can be accomplished with years of passion, toil, and training”.  As discussed in an earlier post, practice in being alert to opportunities could also be expected to expand growth potential.

In the growth mindset people accept both failure and success as providing learning opportunities. The most important questions: What can I learn from that experience? How can I use it as a basis for growth?

Mindset contains important messages about ways in which parents, teachers and coaches can encourage children to adopt a growth mindset. Carol Dweck considers the message of praising effort rather than outcome to be too simplistic.  She now advises teachers and parents “to praise a child's process and strategies, and tie those to the outcome”. In my view she is encouraging realistic appraisal of personal performance and potential for improvement.

My bottom line: Don’t fool yourself that you are being realistic if you adopt a fixed mindset about your intelligence, personality or moral character. Everyone is a work in progress. We make progress by learning from experience.

My attention has been drawn to a study by Yue Li and Timothy Bates that has failed to replicate Carol Dweck's findings regarding praise of intelligence of children and children's beliefs in the malleability of their basic ability. Please see comments below for further information.

Saturday, February 4, 2017

Does Henry George have the answer to funding basic income?

The idea of a government-funded basic income or social dividend has been around for at least a couple of centuries. It has been supported by some prominent advocates of individual liberty as well as by collectivists. For example, it was proposed as an alternative to existing welfare systems by Milton Friedman in the 1960s (as a negative income tax) and by Charles Murray (as an unconditional basic income for all adults) in In Our Hands, published in 2006. More recently Elon Musk among others, has suggested a government-provided unconditional and universal basic income (UBI) as a solution to the hypothetical problem of ensuring that people have adequate incomes when their jobs are displaced by automation.

That problem is hypothetical because it seems reasonable to expect - at a national level and over the longer term - that jobs displaced by automation will be replaced by more highly paid jobs. That is what happened with jobs displaced by mechanisation during the 19th and 20th centuries. No persuasive evidence has emerged to support the view that the effects of automation will differ in that respect. Nevertheless, UBIs might appear to be an attractive social/political insurance policy, just in case automation does result in widespread loss of income-earning opportunities.

The idea that one day most of the population will depend on UBIs as their main source of income strikes me as inherently unappealing. Historically, individual human flourishing has been closely related to the self-respect that comes from earning a living, which is absent when people are able to live on “sit-down money” – an appropirate term used by some Australian aborigines to describe welfare benefits.  Robert Colvile has provided references to research relating to disincentive impacts of UBIs in a recent FEE article.

I want to focus here on a question of practicability: Is there some easy way for a government raise sufficient additional revenue to fund a UBI to reinforce expectations that the benefits of future economic growth will be widely shared? How could substantial additional revenue be raised without stifling the economic growth process? As I contemplated those questions the thought crossed my mind that if I was back working in the Australian public service (heaven forbid!) and was asked to recommend a way to raise more tax revenue, I might suggest more reliance on taxes on the unimproved value of land, as proposed in Australia's Henry report, and as suggested much earlier by Henry George in Progress and Poverty (first published in 1879). Land taxes get a fair amount of support among economists, including some who write for The Economist.

At some point it occurred to me that I should actually read Progress and Poverty – or at least, the 2006 version, edited and abridged by Bob Drake – rather than rely on second hand reports. As I read about Henry George’s theory of wages and interest it became clearer to me why he was viewed as a crack-pot by some of the people who taught me economics. For example, by rearranging the identity, Production = Rent + Wages + Interest, he concludes: “wages and interest do not depend on what labour and capital produce – they depend on what is left after rent is taken out”. Of course, if you rearrange the terms another way, rent would appear as the residual after payment of wages and interest. Modern economists should not be overly critical, however, because George wrote Progress and Poverty before John Bates Clark had made his contribution to the marginal productivity theory of distribution - and Clark apparently attributed his conception of the marginal productivity of labour to George’s theory of rent.

Henry George provides an interesting discussion of the way site rent rises with economic development. He asks readers to imagine a vast unbounded savanna. Every acre seems as good as any other for the first family to arrive, so they make a home somewhere, anywhere. When other families arrive, one location is clearly better than the others, that is close to the family that has already settled. Having a neighbour provides opportunities for the families to help each other. As more people arrive, a village is established to enable people to obtain advantages from local specialization and trade. As the village grows into a town and then into a city, the productivity of the original land increases. As a consequence: “Rent – which measures the difference between this increased productivity and that of the least productive land in use – has increased accordingly”. The original owners of the land become rich “not from anything they have done, but from the increase in population”.

George recognised that advances in technology, improvements in manners and morals and government policy reforms (e.g. free trade) also increase the productivity of land, and increase rents.
Following David Ricardo and John Stuart Mill, George argued that a tax on rent would fall wholly on land owners. He went further, however, in suggesting that all rent could be taxed away for the benefit of society without ill-effect. He suggested that returns to labour would thereby be enhanced:
When all rent is taken by taxation for the needs of the community, equality will be attained. No citizen will have an advantage over any other, except through personal industry, skill, and intelligence. People will gain what they fairly earn. Only then, and not until then, will labor get its full reward, and capital its natural return”.

Henry George was correct to argue that, from an economic efficiency perspective, rent taxes are superior to most other taxes because they have a smaller impact on productive effort and investment. However, it is hard to see how a large increase in land taxes could be viewed as providing an equitable sharing of tax burden. Consider two people who have equal wealth, the wealth of A is in entirely in land and the wealth of the B is entirely in shares in companies that do not own land. Would you view it to be equitable for a government to introduce a tax that would take away a large slice of the wealth of A, while leaving the wealth of B unaffected?

Perhaps that inequity could be overcome by announcing that the new land tax will only apply to future increases in land values. However, the deadweight costs of a tax on future increases in land values would not be negligible. For example, consider a firm that is planning to build a very fast train and considering whether a stopping point along the route should be at City X or City Y. The firm is buying land along the route because it needs to capture some of the expected appreciation in land values to make its investment worthwhile. The firm’s investment appraisal suggests that City X would be the best location. However, it subsequently learns that City X is contemplating a substantial tax on future increases in land values, while City Y has no such plans. That information obviously has potential to tip the balance in favour of City Y, resulting in a less efficient allocation of investment.

The potential deadweight costs of land taxes have been explored in more depth by others, including Bryan Caplan and Zachary Gochenour.

My bottom line: Land taxes are better than many existing taxes (much better than taxes on land transfers) but they don’t offer a costless way to fund the substantial additional revenue that would be required to fund an unconditional basic income sufficient to meet reasonable expectations of a widely-shared dividend from future economic growth. If land taxes can’t do it, I doubt whether any tax-transfer proposal can achieve that objective. One way or another, even when robots do most of the work currently done by humans, humans will still need to earn the bulk of the incomes they live on - including by inventing and improving robots, servicing and managing them, and owning them.