Introduction:

In the ebb and flow of Middle East diplomacy, the two interrelated issues of an Israeli-Syrian peace settlement and Washington’s bilateral relationship with Damascus have gone up and down on Washington’s scale of importance. The election of Barack Obama raised expectations that the United States would give the two issues the priority they had not received during the eight years of the George W. Bush administration. Candidate Obama promised to assign a high priority to the resuscitation of the Arab-Israeli peace process, and separately to “engage” with Iran and Syria (as recommended by the Iraq Study Group in 2006).

In May 2009, shortly after assuming office, President Obama sent the assistant secretary of state for Near Eastern affairs, Jeffrey Feltman, and the senior director for the Middle East in the National Security Council, Daniel Shapiro, to Damascus to open a dialogue with Bashar al-Asad’s regime. Several members of Congress also travelled to Syria early in Obama’s first year, including the chairman of the Senate Committee on Foreign Relations, John Kerry, and the chairman of the House Committee on Foreign Affairs, Howard Berman. In addition, when the president appointed George Mitchell as special envoy to the Middle East, Mitchell named as his deputy Fred Hof, a respected expert on Syria and the Israeli-Syrian dispute. Last summer, both Mitchell and Hof visited Damascus and began their give and take with Syria.

And yet, after this apparent auspicious beginning, neither the bilateral relationship between the United States and Syria, nor the effort to revive the Israeli-Syrian negotiation has gained much traction. Damascus must be chagrined by the fact that when the Arab-Israeli peace process is discussed now, it is practically equated with the Israeli-Palestinian track. This paper analyzes the difficulties confronting Washington’s and Jerusalem’s respective Syria policies and offers an approach for dealing with Syria. Many of the recommendations stem from lessons resulting from the past rounds of negotiations, so it is important to understand what occurred.

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INTRODUCTION

Later this month, Egyptians will go to the polls, or attempt to, in order to vote in the country’s parliamentary elections. The elections will unlikely be a democratic affair in the Western sense. In fact, opposition candidates, voters, citizen groups—essentially everyone other than government representatives—are fully expecting the elections to be a violent and rigged episode. For easy reference, one can look to the June elections for the Shura Council, or upper house of Parliament, in which the governing National Democratic Party (NDP) managed to land 80 out of a possible 84 seats. Those elections were marked by violence and allegations of rampant violations.

Elections in Egypt are not generally democratic, they do not necessarily reflect the will of the people, and they will invariably usher in a house in which the NDP has an unshakeable majority. More so, the elected body has very little control over the government and none over the president, who, thanks to some creative constitutional amendments in 2007, can dissolve the Parliament at will. Election results are apparently so preordained that many have questioned the wisdom of participating at all. Opposition groups, among them the National Alliance for Change (NAC), led by former International Atomic Energy Agency (IAEA) head and current political reformer Mohamed ElBaradei, have been calling for a boycott. ElBaradei told reporters at a Ramadan Iftar meeting on September 7 that voting “would go against the national will.” Many political analysts and some members of the opposition have echoed the belief that participation in the elections only gives credence to a fundamentally flawed system and perpetuates the state myth of a democratic nation.

The above argument certainly has its merits, but it misses the point. Elections in Egypt are not about who wins seats—that is usually a foregone conclusion. They are about the “how and the what,” in the sense that they are oases of political activity, demand, and dissension in an otherwise arid climate. In that way, every election fought represents losses and gains for the respective participants in ways that invariably influence the following elections. Also, the ballot boxes can yield surprising results—as in the case of the 2005 elections when the Muslim Brotherhood (MB) gained a jawdropping 88 of 454 seats in the elections for the lower house. This outcome certainly would not have come about if the Brotherhood had not participated. To be sure, there are also significant, detrimental changes that happen as a direct consequence of the elections, among them constitutional amendments designed to hobble the opposition’s ability to field candidates and campaign. Still, for opposition parties and movements, boycotting the elections is the equivalent of throwing away the only political participation they have. It would mean relinquishing any visibility or influence and it would mean admitting to their supporters that they are essentially mere window dressings in the democratic façade. Arguably, this is a reason why these elections have only ever been boycotted once, in 1990. The Egyptian political arena is one where contestants scrabble for the smallest patch of ground. The high moral ground simply does not figure into it.

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INTRODUCTION

A year after President Hosni Mubarak’s fall, U.S.-Egypt relations are at an all-time low. Not, as many expected, because of the rise of Islamist parties, but because America’s longtime allies in the Egyptian military have whipped up anti-American sentiment at a feverish pace. It may have started as a political ploy, a way to build support on the street and highlight the army’s nationalist credentials, but the generals soon lost control. In January, the Egyptian government announced that sixteen Americans—including the son of a top U.S. official— would be put on trial, facing up to five years in prison. Their apparent crime was working for American nongovernmental organizations (NGOs)—the National Democratic Institute, the International Republican Institute, and Freedom House—that offered support, funding, and election monitoring for Egypt’s uneven transition.

On March 1, the Egyptian government lifted the travel ban on seven Americans who were still in Egypt, allowing them to leave the country. A major diplomatic breach was avoided, giving the impression that the crisis had been resolved. This appears to be the interpretation of the Obama administration, which waived congressional conditions on military aid, citing the importance of maintaining a “strategic partnership” with Egypt.2 However, the charges against the Americans remain, and there is no sign that the American NGOs in question will be able to reopen anytime soon. More importantly, the vast majority of affected NGOs—which are Egyptian rather than American—still find themselves on trial and under attack.

The NGO episode, however worrying it is on its own, reflects something larger and more troubling: the slow descent from the national unity of the revolution to a fog of paranoia, distrust, and conspiracy theorizing. Who is with the revolution, and who isn’t? The roots of the problem lie in the uncertainly inherent in Egypt’s muddled transition. Unlike in Tunisia, where the Higher Committee for the Achievement of Revolutionary Objectives (HCARO)—accepted as legitimate by all of the country’s main political forces—was responsible for managing the transition, Egypt has featured various competing actors claiming their own distinct sources of power. The struggle for legitimacy between the Supreme Council of the Armed Forces (SCAF), the Muslim Brotherhood-dominated parliament, and the protest movement has created a fragmented political scene. Everyone wants to lead the transition, but no one wants to take full responsibility for the results.

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According to an August 2015 survey, 72 percent of Americans find drug costs unreasonable, with 83 percent believing that the federal government should be able to negotiate prices for Medicare. Recently, Acting Administrator of the Centers for Medicare and Medicaid Services (CMS) Andy Slavitt commented that spending on medicines increased 13 percent in 2014 while health care spending growth overall was only 5 percent, the highest rate of drug spending growth since 2001.

Some of the most expensive drugs are covered under Medicare’s medical benefit, Part B, because they are administered by a physician. They are often administered in hospital outpatient departments and physician offices, and most commonly used to treat conditions like cancer, rheumatoid arthritis, and macular degeneration. Between 2005 and 2014, spending on Part B drugs has increased annually by 7.7 percent, with the top 20 drugs by total amount of Medicare payments accounting for 57 percent of total Part B drug costs. While overall Part B drug spending is a small portion of Medicare drug spending, the high growth rate is a concern, especially as new expensive breakthrough cancer drugs enter the market and have a negative effect on consumers’ pockets.

Unlike Part D, the prescription drug benefit, there are fewer incentives built in to Part B for providers to consider lower cost treatments for patients even if the lower cost drug may be clinically equivalent to the more expensive drug, because prior to budget sequestration, providers received 6 percent on top of the Average Sales Price (ASP) of the drug. Larger providers and hospitals often receive discounts on these drugs as well, increasing the amount they receive directly on top of the out-of-pocket cost of the drug.

This leads to more out-of-pocket costs for the consumer, as patients usually pay 20 percent of Part B services. The Government Accountability Office (GAO) estimated that in 2013, among new drugs covered under Part B, nearly two-thirds had per beneficiary costs of over $9,000 per year, leading to out-of-pocket costs for consumers of amounts between $1,900 and $107,000 over the year. On top of these high costs, this can lead to problems with medication adherence, even for serious conditions such as cancer.

A New Payment Model

To help change these incentives and control costs, CMS has proposed a new demonstration program, which offers a few different reimbursement methods for Part B drugs. The program includes a geographically stratified design methodology to test and evaluate the different methods. One of the methods garnering a lot of attention is a proposal to lower the administration add-on payment to providers, from current 6 percent of ASP, to 2.5 percent plus a flat fee of $16.80 per administration day.

Policymakers, physician organizations, and patient advocacy organizations have voiced major concerns raising the alarm that this initiative will negatively affect patient access to vital drugs and therefore produce poorer patient outcomes. The sequester will also have a significant impact on the percentage add on, reducing it to closer to an estimated .86 percent plus the flat fee. But we believe the goals of the program and its potential to reduce costs represent an important step in the right direction. We hope the details can be further shaped by the important communities of providers and patients who will deliver and receive medical care.

Geographic Variation

Last year, we wrote a Health Affairs Blog that highlighted some of the uses and limitations of publicly available Part B physician payment data. One major use was to show the geographic variation in practice patterns and drug administration, and we particularly looked at the difference across states in Lucentis v. Avastin usage. As seen in Exhibit 1, variation in administration is wide among states, even though both are drugs used to treat the same condition, age-related macular degeneration, and were proven to have clinically similar outcomes, but the cost of Lucentis was $2,000 per dose, while Avastin was only $50 per dose.

Using the same price estimates from our previous research, which are from 2012, we found that physician reimbursement under the proposed demonstration would potentially change from $120 to $66.80 for Lucentis, and increase from $3 to $18.05 for Avastin. Under the first payment model, providers were receiving 40 times as much to administer Lucentis instead of Avastin, while under the new proposed payment model, they would only receive 3.7 times as much.

While still a formidable gap, this new policy would have decreased financial reimbursement for providers to administer Lucentis, a costly, clinically similar drug to the much cheaper Avastin. As seen in Exhibit 1, a majority of physicians prescribe Avastin, thus this policy will allow for increased reimbursement in those cases, but in states where Lucentis is prescribed in higher proportions, prescribing patterns might start to change as a result of the proposed demonstration.

Source: Author’s estimates using 2012 CMS Cost Data and Sequestration Estimates from DrugAbacus.org

The proposed demonstration program includes much more than the ASP modifications in its second phase, including:

• discounting or eliminating beneficiary copays,
• indication-based pricing that would vary payments based on the clinical effectiveness,
• reference pricing for similar drugs,
• risk-sharing agreements with drug manufacturers based on clinical outcomes of the drug, and
• creating clinical decision tools for providers to help develop best practices.

This is all at the same time that a new model in oncology care (OCM) is being launched, which could help to draw attention to total cost of care. It is important that CMS try to address rising drug costs, but also be sure to consider all relevant considerations during the comment period to fine-tune the proposal to avoid negative effects on beneficiaries’ care.

We believe CMS should consider offering a waiver for organizations already participating in Center for Medicare & Medicaid Innovation (CMMI) models like the OCM, because financial benchmarks are based on past performance and any savings recognized in the future could be artificial, attributable to this demonstration rather than to better care coordination and some of the other practice requirements that are part of the proposed OCM. Furthermore, because this demonstration sets a new research precedent and because it is mandatory in the selected study areas rather than voluntary, CMS must try to anticipate and avoid unintended consequences related to geographic stratification.

For example, it is possible to imagine organizations with multiple locations directing patients to optimal sites for their business. Also, without a control group, some findings may be unreliable. The proposed rule currently lacks much detail, and there does not seem to be enough time for organizations to evaluate the impact of the proposed rule on their operations. Having said that, it will be important for stakeholders of all types to submit comments to the proposed rule in an effort to improve the final rule prior to implementation.

The critical question for the policymakers and stakeholders is whether this model can align with the multitude of other payment model reforms — unintended consequences could mitigate all the positive outcomes that a CMMI model offers to beneficiaries. Helping beneficiaries is and should be CMS’ ultimate obligation.

Over 200 delegates from 50 countries gather this week in Washington for the Presidential Summit on Entrepreneurship. The summit hosts entrepreneurs to teach and learn innovative ways to strengthen professional and social relationships between the U.S. and the Islamic world. During his first major address to the Muslim world, delivered in Cairo last June, President Obama pledged to increase engagement through entrepreneurship, exchange programs and multilateral service initiatives.

Volunteer-led development initiatives have begun to act on Obama’s call for citizen diplomacy and private-sector engagement. The Initiative on International Volunteering and Service at Brookings and the Building Bridges Coalition have fueled an emerging legislative initiative that calls for increasing the role of international volunteers in the U.S. diplomatic agenda and development programs. This Service World Initiative has drawn from Brookings research outlining options to advance the president’s call for multilateral service.

As seen last year, for the first time in history, the majority of the world’s population lived in urban areas. And this trend is accelerating at an unprecedented rate. By 2050, urban dwellers are expected to make up about 70 percent of Earth’s total population. These informed 21st century urban citizens demand 24-7 connectivity, smart electric grids, efficient transportation networks, safe food and water, and transparent social services. All these demands place a huge strain on existing city infrastructures and the global environment. Most affected by this rapid urban boom, are the emerging markets. So how do we tackle this development dilemma?

One way is for highly-skilled experts, from a range of countries, to volunteer their time in emerging markets to help improve economic development, government services and stimulate job growth. This type of pro-bono program has many benefits. It benefits the urban areas in these emerging markets by leveraging intelligence, connecting systems and providing near-term impact on critical issues such as transportation, water, food safety, education and healthcare. It benefits the expert volunteers by fostering their teamwork skills, providing a cultural learning experience, and broadening their expertise in emerging markets.

IBM, which chairs the Building Bridges Coalition’s corporate sector, hosts a range of volunteer-led global entrepreneurship programs that improve economic stability for small- and medium-sized businesses, increase technology in emerging markets and open doors for the next generation of business and social leaders. This program connects high-talent employees with growing urban centers around the world and fosters the type of leadership to help IBM in the 21st century.

Recently, IBM sent a group of experts to Ho Chi Minh City as part of its Corporate Service Corps, a business version of the Peace Corps. This was the first Corporate Service Corps mission to be made up of executives, and the first to help a city in an emerging market analyze its challenges holistically and produce a plan to manage them. As a result, the city has now adopted a 10-year redevelopment plan that includes seven pilot programs in areas ranging from transportation to food safety. IBM will also help the city set up academic programs to prepare young Vietnamese to launch careers in technology services. IBM will continue this program throughout the next couple years to evolve the next set of global business and cultural hubs utilizing the volunteer hours of some of its most seasoned experts.

The Presidential Summit this week will further Obama’s call to “turn dialogue into interfaith service, so bridges between peoples lead to action.” The policy initiative of the Building Bridges Coalition, coupled with entrepreneurial innovations such as IBMs, can foster greater prosperity and service between the U.S. and our global partners.

INTRODUCTION

Over the past decade, the focused attention of African nations, the United States, U.N. agencies and other multilateral partners has brought significant progress toward achievement of the Millennium Development Goals (MDGs) in health and malaria control and elimination. The potential contribution of these strategies to long-term peace-building objectives and overall regional prosperity is of paramount significance in sub-regions such as the Horn of Africa and Western Africa that are facing the challenges of malaria and other health crises compounded by identity-based conflicts.

National campaigns to address health Millennium Development Goals through cross-ethnic campaigns tackling basic hygiene and malaria have proven effective in reducing child infant mortality while also contributing to comprehensive efforts to overcome health disparities and achieve higher levels of societal well-being.

There is also growing if nascent research to suggest that health and other humanitarian interventions can result in additional benefits to both recipients and donors alike.

The social, economic and political fault lines of conflicts, according to a new study, are most pronounced in Africa within nations (as opposed to international conflicts). Addressing issues of disparate resource allocations in areas such as health could be a primary factor in mitigating such intra-national conflicts. However, to date there has been insufficient research on and policy attention to the potential for wedding proven life-saving health solutions such as malaria intervention to conflict mitigation or other non-health benefits.

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Stephen was still a teenager on the north side of St. Louis when his dad, a police officer, was killed during a robbery in their neighborhood. Despite the trauma, Stephen later joined the police force to continue his dad’s legacy and commitment to safe and inclusive neighborhoods. But even before the fatal shooting of Michael Brown in Ferguson in 2014, Stephen (not his real name) yearned to right local wrongs through broader approaches. “The darkest forces weren’t necessarily the ones getting arrested,” he observed. “So I retired from the police force after 22 years, essentially to chase after a different type of perpetrator.” Wanting to focus on policies at multiple levels of government that “were causing the disparities that fueled increasing crime and violence in St. Louis,” Stephen pivoted to civil rights enforcement, tracking policy violations and innovations at a government agency in the St. Louis region.

I met Stephen in February while in St. Louis for a conference his agency organized on HUD’s recently strengthened Affirmatively Furthering Fair Housing (AFFH ) rule, which increases local accountability in promoting residential integration. He wasn’t a speaker at the event, but hearing his story reinforced the importance of combating the deeply entrenched and often invisible causes of segregation.

Recent events and new academic research, including landmark findings by Raj Chetty and colleagues testifying to the benefits of low-poverty neighborhoods for low-income kids, the updated AFFH rule, and the Supreme Court’s disparate impact decision upholding other tools to fight segregation have brought renewed attention to these challenges. Meanwhile, underlying these developments, poverty has failed to decline since the recession and, as recent Brookings research shows, has become more concentrated in neighborhoods of extreme poverty.

How can regional leaders and practitioners respond to these challenges? I was in St. Louis to discuss one part of the solution—advancing more mixed-income neighborhoods. In the Chicago region, our housing and community development-focused firm, BRicK Partners, is collaborating with the Chicago Metropolitan Agency for Planning (CMAP), the Illinois Housing Development Authority (IHDA), and 10 metropolitan Chicago public housing authorities, with support and leadership from HUD, to develop and operate the Regional Housing Initiative (RHI)

RHI is a small, systemic, and potentially scalable “work around” of a very specific set of programs and policies that contribute inadvertently to regional inequities. A flexible and regional pool of resources working across the many traditional public housing authority (PHA) and municipal jurisdictions in the Chicago region, RHI increases quality rental housing in neighborhoods with good jobs, schools, and transit access and provides more housing options to households on Housing Choice Voucher (HCV) waiting lists. Recognizing that the federal formulas allocating HCVs to each individual PHA are not responsive to population, employment, or poverty trends, RHI partners convert and pool a small portion of their HCVs to provide place-based operating subsidies in support of development activity that advances local and regional priorities. RHI supports both opportunity areas with strong markets and quality amenities as well as revitalization areas where public and private sector partners are planning and investing toward that end. In both cases, the bulk of RHI investments are in the suburbs, where the PHAs are smaller and the rental stock more limited. 

RHI has committed over 550 RHI subsidies to nearly 40 mixed-income and supportive housing developments across Chicagoland, supporting more than 2,200 total apartments, over half of which are in opportunity areas. The pooling and transferring of subsidies has allowed RHI to support proposals that local jurisdictions wouldn’t be able to undertake otherwise.

Although a number of innovative programs around the country provide assistance to households moving to opportunity areas, RHI is unique its focus on increasing the supply of housing in opportunity areas regionwide. Its approach is consistent with lessons learned from Brookings’ work on Confronting Suburban Poverty in America: With CMAP as a strong quarterback, RHI has addressed the shortage of rental housing in the suburbs by working across jurisdictions, developing shared priorities, metrics and selection criteria, and by working with IHDA and other stakeholders to leverage greater private sector investment.

This recipe for success is now being deployed in communities beyond Chicago. Baltimore is preparing to advertise for its first round of developer applicants under the leadership of the Baltimore Metropolitan Council, with regionwide PHAs, the State Housing Finance Agency, and a regional housing counselor lined up as supportive partners. In St. Louis, the regional planning and housing finance organizations both attended the February conference where I met Stephen, signaling the potential for greater collaboration for both these entities and the PHAs.

Like many housing advocates and professionals, my colleagues and I at BRicK Partners derive a lot of satisfaction from supporting communities like Baltimore and St. Louis and individuals like Stephen and his peers with replicable best practices. Given today’s political realities, we don’t expect major changes in the federal formulas and statutes behind some of the regional inequities, but “work arounds” such as RHI can still scale up. Nationwide, just a small percentage of HCVs have been converted for such flexible supply-side solutions, but there is reason to be hopeful that this will change. The Regional Mobility Demonstration proposed in the 2017 budget as well as federal public housing voucher legislation passed by the House of Representatives earlier this year are signs that there is real momentum to advance regional strategies that increase access to opportunity for low income residents and families. 

There are a number of causes of the financial crisis that has devastated the U.S. economy and spread globally. Weakness in financial sector regulation was one of the causes and the proliferation of different regulators is, in turn, a cause of the regulatory failure. There is a bewildering, alphabet soup variety of regulators and supervisors for banks and other financial institutions that failed in their task of preventing the crisis and, at the same time, created an excessive regulatory burden on the industry because of overlapping and duplicative functions.

We can do better. This paper makes the case for a single micro prudential regulator, that is to say, one federal agency that has responsibility for the supervision and regulation of all federally chartered banks and all major non-bank financial institutions. There would still be state-chartered financial institutions covered by state regulators, but the federal regulator would share regulatory authority with the states.

The Objectives Approach to Regulation

The Blueprint for financial reform prepared by the Paulson Treasury proposed a system of objectives-based regulation, an approach that had been previously suggested and that is the basis for regulation in Australia. The White Paper prepared by the Geithner Treasury did not use the same terminology, but it is clear from the structure of the paper that their approach is essentially an objectives-based one, as they lay out the different elements of regulatory reform that should be covered. I support the objectives approach to regulation.

There should be three major objectives of regulation, as follows.

• To make sure that there is micro-prudential supervisions, so that customers and taxpayers are protected against excessive risk taking that may cause a single institution to fail.

• To make sure that whole financial sector retains its balance and does not become unstable. That means someone has to warn about the build up of risk across several institutions and perhaps take regulatory actions to restrain lending used to purchase assets whose prices are creating a speculative bubble.

• To regulate the conduct of business. That means to watch out for the interests of consumers and investors, whether they are small shareholders in public companies or households deciding whether to take out a mortgage or use a credit card.

In applying this approach, it is vital for both the economy and the financial sector that the Federal Reserve has independence as it makes monetary policy. Experience in the United States and around the world supports the view that an independent central bank results in better macroeconomic performance and restrains inflationary expectations. An independent Fed setting monetary policy is essential.

An advantage of objectives-based regulation is that it forces us to consider what are the “must haves” of financial regulation—those things absolutely necessary to reduce the chances of another crisis. Additionally we can see the “must not haves”—the regulations that would have negative effects. It is much more important to make sure that the job gets done right, that there are no gaps in regulation that could contribute to another crisis and that there not be over-regulation that could stifle innovation and slow economic growth, than it is that the boxes of the regulatory system be arranged in a particular way. In turn, this means that the issue of regulatory consolidation is important but only to the extent that it makes it easier or harder to achieve the three major objectives of regulation efficiently and effectively.

For objectives-based regulation to work, it is essential to harness the power of the market as a way to enhance stability. It will never be possible to have enough smart regulators in place that can outwit private sector participants who really want to get around regulations because they inhibit profit opportunities or because of the burdens imposed. A good regulatory environment is structured so that people who take risks stand to lose their own money if their bets do not work out. The crisis we are going through was caused by both market and regulatory failures and the market failures were often the result of a lack of transparency (“asymmetric information” in the jargon of economics). Those who invested money and lost it often did not realize the risks they were taking. To the extent that policymakers can enhance transparency, they can make market forces work better and help achieve the goal of greater stability.

Having a single micro prudential regulator would help greatly in meeting the objectives of regulation, a point that will be taken up in more detail below. It is not a new idea. In 1993-94, the Clinton and Riegle proposals for financial regulation said that a single micro prudential regulator would provide the best protection for the economy and for the industry. In the Blueprint developed by the Paulson Treasury, it was proposed that there be a single micro prudential regulator. 

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Many scholars have argued that once “basic needs” have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of “basic needs” and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.

Introduction

In 1974 Richard Easterlin famously posited that increasing average income did not raise average well-being, a claim that became known as the Easterlin Paradox. However, in recent years new and more comprehensive data has allowed for greater testing of Easterlin’s claim. Studies by us and others have pointed to a robust positive relationship between well-being and income across countries and over time (Deaton, 2008; Stevenson and Wolfers, 2008; Sacks, Stevenson, and Wolfers, 2013). Yet, some researchers have argued for a modified version of Easterlin’s hypothesis, acknowledging the existence of a link between income and well-being among those whose basic needs have not been met, but claiming that beyond a certain income threshold, further income is unrelated to well-being.

The existence of such a satiation point is claimed widely, although there has been no formal statistical evidence presented to support this view. For example Diener and Seligman (2004, p. 5) state that “there are only small increases in well-being” above some threshold. While Clark, Frijters and Shields (2008, p. 123) state more starkly that “greater economic prosperity at some point ceases to buy more happiness,” a similar claim is made by Di Tella and MacCulloch (2008, p. 17): “once basic needs have been satisfied, there is full adaptation to further economic growth.” The income level beyond which further income no longer yields greater well-being is typically said to be somewhere between $8,000 and $25,000. Layard (2003, p. 17) argues that “once a country has over $15,000 per head, its level of happiness appears to be independent of its income;” while in subsequent work he argued for a $20,000 threshold (Layard, 2005 p. 32-33). Frey and Stutzer (2002, p. 416) claim that “income provides happiness at low levels of development but once a threshold (around $10,000) is reached, the average income level in a country has little effect on average subjective well-being.”

Many of these claims, of a critical level of GDP beyond which happiness and GDP are no longer linked, come from cursorily examining plots of well-being against the level of per capita GDP. Such graphs show clearly that increasing income yields diminishing marginal gains in subjective well-being. However this relationship need not reach a point of nirvana beyond which further gains in well-being are absent. For instance Deaton (2008) and Stevenson and Wolfers (2008) find that the well-being–income relationship is roughly a linear-log relationship, such that, while each additional dollar of income yields a greater increment to measured happiness for the poor than for the rich, there is no satiation point.

In this paper we provide a sustained examination of whether there is a critical income level beyond which the well-being–income relationship is qualitatively different, a claim referred to as the modified-Easterlin hypothesis. As a statistical claim, we shall test two versions of the hypothesis. The first, a stronger version, is that beyond some level of basic needs, income is uncorrelated with subjective well-being; the second, a weaker version, is that the well-being–income link estimated among the poor differs from that found among the rich.

Claims of satiation have been made for comparisons between rich and poor people within a country, comparisons between rich and poor countries, and comparisons of average well-being in countries over time, as they grow. The time series analysis is complicated by the challenges of compiling comparable data over time and thus we focus in this short paper on the cross-sectional relationships seen within and between countries. Recent work by Sacks, Stevenson, and Wolfers (2013) provide evidence on the time series relationship that is consistent with the findings presented here.

To preview, we find no evidence of a satiation point. The income–well-being link that one finds when examining only the poor, is similar to that found when examining only the rich. We show that this finding is robust across a variety of datasets, for various measures of subjective well-being, at various thresholds, and that it holds in roughly equal measure when making cross-national comparisons between rich and poor countries as when making comparisons between rich and poor people within a country.

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At a time of decelerating regional growth in sub-Saharan Africa, South Africa—one of the continent’s leading economies—is facing the brunt of concurrent external and domestic growth shocks. During a Brookings event on April 14, 2016 moderated by Africa Growth Initiative Director Amadou Sy, South African minister of finance, the Honorable Pravin Gordhan, provided cause for encouragement, as he highlighted strategies that South Africa is implementing to reverse slowing growth trends, boost social cohesion, and springboard inclusive, sustainable development.

Throughout the event, Minister Gordhan emphasized that South Africa is refocusing its efforts on implementing homegrown policies to mitigate the effects of global and domestic shocks: “Our approach is not to keep pointing outside our borders and say, ‘That’s where the problem is.’ We've got our own challenges and difficulties, and potential and opportunities. And it's important to focus on those, and rally South Africans behind that set of initiatives so that we could go wherever we can in terms improving the situation.”

He began by explaining the major growth problems facing South Africa, including first-level structural challenges—consistent electricity supply and labor relations—as well as deeper structural challenges, for instance, reforming the oligopolistic sectors of its economy. To address these issues, he expanded on what collaborative, multi-stakeholder efforts would be necessary. Watch:

Contending with infrastructure needs—particularly energy and logistical, but also social, such as water and sanitation, health care, and educational facilities—will play a significant role in overcoming these aforementioned challenges. Minister Gordhan explained how the government aims to fill existing infrastructure gaps through innovative financing mechanisms. Watch:

Later in the event, Sy pressed Minister Gordhan on plans for implementation for the country’s ambitious goals. As an example, Minister Gordhan underlined “Operation Phakisa,” a results-driven approach to fast-track the implementation of initiatives to achieve development objectives. The government intends to use this methodology to address a number of social priorities, including unlocking the potential of South Africa’s coastlines and oceans. Watch:

Urbanization in South Africa and sub-Saharan Africa as a whole is widespread and increasing, creating a demand for governments to both maintain their infrastructure as well as harness their energy and human capacity. Cities, especially those in South Africa’s Gauteng Province (Johannesburg, Pretoria, and Ekurhuleni), will continue to be crucial engines of economic development if municipal governance systems effectively manage the region’s expected rapid urbanization in the years to come. Minister Gordhan discusses some of the lessons learned from the Gauteng city region. Watch:

In sum, referring to the confluence of adverse global conditions and internal problems currently affecting South Africa, Minister Gordhan stated, “Whenever you are in the middle of a storm it looks like the worst thing possible—but storms don’t last forever.” He did not doubt the ability of the South African people to weather and emerge stronger from the storm, offering: “Ultimately South Africans are hopeful, are optimistic and resilient.”

You can watch the full event here. 

Video

• Pravin Gordhan notes the major growth challenges in South Africa
• Pravin Gordhan on addressing South Africa’s infrastructure gaps
• Pravin Gordhan on implementation of South Africa's development objectives
• Pravin Gordhan on the vital role of cities in economic development in South Africa