Happiness & Public Policy

HAPPINESS

I ASKED the professors who teach the meaning of life to tell
me what is happiness.
And I went to famous executives who boss the work of
thousands of men.
They all shook their heads and gave me a smile as though
I was trying to fool with them
And then one Sunday afternoon I wandered out along
the Desplaines river
And I saw a crowd of Hungarians under the trees with
their women and children and a keg of beer and an
accordion.

- Carl Sandburg

Related to below, by Matthias Benz:

It is typically assumed that people engage in entrepreneurship because there are profits to be made. In contrast to this view, this paper argues that entrepreneurship is more adequately characterized as a non-profit-seeking activity. Evidence from a broad range of authors and academic fields is discussed showing that entrepreneurship does quite generally not pay in monetary terms. Being an entrepreneur seems to be rather rewarding because it entails substantial non-monetary benefits, like greater autonomy, broader skill utilization, and the possibility to pursue one’s own ideas. It is shown how incorporating these non-monetary benefits into economic models of entrepreneurship can lead to a better understanding of the phenomenon.

Paper here.

From  Matthias Benz and Bruno Frey, Swedish Economic Policy Review, 2004.

ABSTRACT. Self-employed people are substantially more satisfied with their work than the employed. We document this relationship for a large number of countries and investigate why the self-employed are happier with their jobs. The results indicate that differences in material outcomes, like higher pay or a lower number of working hours, as well as potential differences in personality cannot account for the observed job satisfaction differences. Rather, the higher job satisfaction among the self employed can be directly attributed to the greater independence and autonomy they enjoy. “Being your own boss” seems to provide non-pecuniary benefits from work that point to the existence of “procedural utility”: autonomy is valued beyond outcomes as a good decision-making procedure. Implications of the results for economic theory and economic policy are discussed.

Here’s the paper.

. . . I trust the friends of the proposed constitution will never concur with its enemies in questioning that fundamental principle of republican government, which admits the right of the people to alter or abolish the established constitution whenever they find it inconsistent with their happiness. . .

- Alexander Hamilton, Federalist No. 78

Hamilton here echoes the language of the Declaration. Again, happiness here seems to mean something quite broad like “good fortune” or “well-being,” not a feeling of pleasure of satisfaction. That may be on reason why the two following passages bear only a superficial resemblance in content:

By the principle of utility is meant that principle which approves or disapproves of every action whatsoever according to the tendency it appears to have to augment or diminish the happiness of the party whose interest is in question: or, what is the same thing in other words to promote or to oppose that happiness. I say of every action whatsoever, and therefore not only of every action of a private individual, but of every measure of government.

- Jeremy Bentham, Introduction to the Principles of Morals and Legislation

And

We ought to consider what is the end of government, before we determine which is the best form. Upon this point all speculative politicians will agree, that the happiness of society is the end of government, as all divines and moral philosophers will agree that the happiness of the individual is the end of man. From this principle it will follow, that the form of government which communicates ease, comfort, security, or, in one word, happiness, to the greatest number of persons, and in the greatest degree, is the best.

- John Adams, “Thoughts on Government”

A further reason why Adams is not expressing a Benthamite sentiment (his son, by the way, was a big fan of Bentham) is contained in the paragraphs directly preceding:

the divine science of politics is the science of social happiness, and the blessings of society depend entirely on the constitutions of government, which are generally institutions that last for many generations, there can be no employment more agreeable to a benevolent mind than a research after the best.

Pope flattered tyrants too much when he said,

“For forms of government let fools contest,
That which is best administered is best.”

Nothing can be more fallacious than this. But poets read history to collect flowers, not fruits; they attend to fanciful images, not the effects of social institutions. Nothing is more certain, from the history of nations and nature of man, than that some forms of government are better fitted for being well administered than others.

That, in a nutshell, is Bentham’s bind. Adams is looking for a general, structural solution to the problem of securing ease, comfort, and security, and isn’t going to just assume rational administration by benevolent experts. Bentham’s constitutional writings don’t assume this, either, but he often slips into it. For instance, in an article about Bentham’s ideas in poverty relief policy, Michael Quinn writes:

Bentham does appear to glory in the scope which detention in a Poor Panopticon gives its governor to break down and recast entire personalities. He can plausibly be presented as anticipating Skinner’s box, and filling it with, to use his own expression, ‘that part of the national livestock which has no feathers to it and walks on two legs’, instead of rats. Ought we not then to suspect that, in Bahmueller’s words, ‘if the truth were known, we would soon suspect that it was not only the indigent that Bentham wanted to control, but us too, all of us. That is, we might suspect that Panopticon was a version of Benthamite society writ small.’ Indeed, is Bahmueller further correct to view the emerging apprentices of the Poor Panopticon, liberated after an entire lifetime of indoctrination, as the stormtroopers of a Benthamic blitzkrieg, as ‘foot soldiers in a surreptitious guerilla war he hoped to wage against the entrenched mores of an unutilitarian society’? When Bentham describes his poor house as a ‘utopia’, is the correct implication that drawn by both Bahmueller and Himmelfarb, that he believes that everyone would be much better off for a course in utilitarian conditioning?

It’s not obvious that he does think this. But I think it is a clear temptation in any aggregative or maximizing theory.

2 comments

It is an indisputable point, (or, at least, there is room to think it, in this philosophical age, an acknowledged truth) that the first object of all governments, should be to render the people happy.

- Jean Francois, Marquis de Chastellux, An Essay on Public Happiness, 1774.

This book is a pretty amazing and often pretty weird attempt at normative economic history. Chastellux tries to estimate, on the basis of the data available at the time, which “nations” through history best excelled in producing happiness. The assumption, as the quote suggests, is that the best government is the one with the happiest subjects.

The U.S. Declaration of Independence clearly contains the assumption that the legitimacy of a government, the justification of its authority, depends on its securing the conditions for its subjects happiness. What are other sources for the happiness legitimacy link?

It is interesting that many mentions of happiness in the Enlightenment seem meant to apply to the affairs of the people as a whole—a happy ordering, as opposed to a collection of happy individuals–although both are often meant at once. The difference between the Lockeans and the Benthamites about the government-happiness connection is the difference between a coordinative and an aggregative conception of morality. Coordinative moral theories scale up into theories of coordination sustaining political institutions. The Federalist Papers, e.g. Aggregative moral theories tend to scale up into paternalistic authoritarianism, e.g., “Government house utilitarianism,” to use Bernard Williams’s great phrase. Bentham himself waffles between simply imposing utility maximizing institutions (the Panoptican, the National Charity Corporation) manned by utilitarian elites and, on the other hand, setting up cooperation sustaining institutions that of necessity must be structured to limit predation, which limits the power of elites of whatever philosophical stripes.

In Vegas at the APEE meeting, Larry White gave me his paper “Is There an Economics of Interpersonal Comparisons?,” Advances in Austrian Economics 2a (1995): 135-51, which is really outstanding. Larry does a great job cutting through all the confusion about the various sense of utility, etc. So, since actuality implies possibility, I know it’s possible for economists not to be at all confused about what “economics” does an doesn’t say. But the last three papers I just read (by significant figures in economics) simply refuse to not be confused.

For example, Easterlin writes: “In contrast, economics places particular stress on the importance of life circumstances to well-being, particularly one’s income and employment situation.” I hadn’t realized that economics includes a theory of well-being! (Economics says income and employment have a lot to do with utility; it is not a part of the theory that utility is what makes a life go well.) Easterlin here is working into a contrast between setpoint-adaptation theory with his aspiration readjustment theory. Which is fine. But there is nothing about economic theory that is inconsistent with setpoint-adaptation theory. See for example Becker and Rayo’s paper “Evolutionary Efficiency and Mean Reversion in Happiness” which elegantly and ingeniously models adaptation using orthodox analytical tools without fuss. So why bring it up? Easterlin is really saying that adaptation is not part of economic folk theory. Which is correct, but maybe not relevant? Anyway, I think I’m just about to give up. Pointing out the difference between economic theory and regularities in opinion among economists isn’t hairsplitting. (Imagine political philosophers confusing regularities of opinion among political philosophers for a theory. Oh no, wait!) But it’s tiresome, and after a while, I start to feel like I am hairsplitting.

The new Journal of Economic Perspectives [walled] contains two interesting looking happiness papers, one on “Developments in the Measurement of Subjective Well-Being” by Kahnemann and Krueger, and “Some Uses of Happiness Data in Economics” by Di Tella and MacCulloch.

I’m halfway through the Kahneman-Krueger paper. Worthwhile data on self-reports versus experience sampling method versus day reconstruction method. While Kahneman is spot on about what’s wrong with global self-reports, I think he’s a bit too blithe in assuming that ESM and DRM get at the objective subjective situation (”experiened utility” in Kahneman’s terms). And the argument against shifting aspiration levels (i.e. Easterlin) and in favor of adaptation strikes me as too quick. The argument, in a nutshell, is that if shifting aspiration levels explained flat self-report trends, then net positive affect, as measured by ESM/DRM, ought to be rising with income, but it’s not. Therefore, adaptation. They may be right. But I’m not convinced that the way people score their feeling in moment to moment, or day to day, self-reports don’t also suffer from readjusting expectations. I am convinced that people are going to be pretty accurate about self-reporting the valence of affect, i.e., whether it is good or bad. So I may not have much problem with Krueger and Kahneman’s “U-Index,” which just measures the proportion of time spent having negative experiences. But I’m not convinced that improvements in the quality of experience aren’t being lost in even fine-grained self-reports. Again, I think we need good work on hormonal and neuronal correlates of good feelings to be sure. (They cite an interesting-sounding study that took cortisol samples, which is the right approach.)

Funny line:

A duration-weighted measurement of affect will uncover that conditions such as paraplegia or marriage are not full-time states; they are experienced part-time.

And, Bishop Berkeley says, good thing God is experiencing us all full-time, or we’d all disappear!

There are undoubtedly more. Feel free to add in the comments.

1. Life-satisfaction isn’t happiness, so measuring life satisfaction isn’t a way of measuring happiness.
2. In any case, almost all work based on life-satisfaction surveys simply assume, against the grain of scientific knowledge about the reliability of self-reports, that talk tracks fact; almost no one tries to control for the contextual nature of the self-ascription of subjective states.
3. Work on social comparison tends to infer wrecklessly from the logic of mate competition and the existence of primate dominance hierarchies to an agonistic view of human status. Worse, and semi-nonsensically, the wealth distribution is identified with the status dimension. None of this is supported by anthropological or sociological theory, evidence, or first-person experience of status competition.
4. There is a willingness to draw sweeping generalizations on the basis of cross-sectional surveys, but many of these obscure large variations between individuals or cohorts. Even if surveys actually tracked happiness, as opposed to fairly uninteresting, contextually erratic global judgments about how life is going, we’d need better longitudinal data to know much worth knowing.
5. Happiness is not a natural, universal psychological kind about which one can draw strict law-like generalizations. Happiness is a cultural/normative kind: a combination of basic emotions, moods, beliefs, and behavioral and inferential dispositions. It is a syndrome of feeling, belief, and action. The constitution of the syndrome, as exemplified in philosophy, history, and literature, has changed markedly over just the past 500 years.
6. Because of 4., a lot of speculation on, say, the adaptive function of happiness is misguided. The function of positive affect or the reward system simply isn’t the same thing as the function of happiness. It is likely that happiness has no more a biological function than ataraxia, stoic imperturbility (and maybe, I think, the Biblical “peace that passes understanding”). A paper on the adaptive biological function of ataraxia, apatheia, nirvana or satori or existential dread would strike us as weird. These are historically and culturally specific syndromes of feeling, belief, and behavior. Papers on the biological function of happiness ought to strike us in about the the same way.
7. On the policy front: There seems to be a widespread but largely unspoken view that a “scientific” approach to value, and therefore policy, must involve a master value that can be maximized, and into which all subordinate values can be translated. But this assumption flows from precisely the kind of rationalist a priori method that is anathema to an empirical approach to value. Descriptive moral anthropology clearly supports value pluralism, not monism. The scientific problem of institutional design in a pluralist world isn’t the problem of how to maximize the quantity of a single culturally contingent syndrome of feeling, belief, and behavior, at the expense of competing syndromes. Rather, the problem is how to create patterns of social cooperation that are stable because each participant judges the terms of cooperation beneficial, despite the fact that there is no single agreed upon conception of “benefit.” In a culture like ours, where most worldviews place some significant value on happiness, terms of cooperation will need to be conducive to happiness, or they will not be considered beneficial, won’t gain willing compliance, and so won’t be stable. So a “scientific” approach to policy takes happiness seriously. But that’s a far cry from the absurdity of trying to maximize according to the terms of just one of the competing conceptions of value.

By the way, I found the Layard transcript at this post by Paul Asad at Truck and Barter, which includes a great collection of happiness links.

I haven’t piled on Richard Layard for a while now. So isn’t it time?

I found this transcript from an interview show on Autralian radio. I’ll emphasize the especially annoying bits:

Finally, let me end on values. Some people think values are a private matter; of course they never have been. In every society people have been concerned with the values which other people’s children absorb, because they affect all of us. So it’s very important what kind of values are being offered to our children in our schools. Now in a recent WHO survey, this is of 11- to 15-year-olds, they were asked ‘Do you agree with the statement that most of the students in my classes are kind and helpful?’ Here are the answers: Sweden, 77% yes; Germany, 76%; Denmark, 73%; USA, 53%; Russia, 46%; England, 43%.

Now I think that this is a pretty depressing picture, and it corresponds rather closely to another set of questions which I’ve often been asked of the population, namely, ‘Do you think most other people can be trusted?’ In Scandinavia, again they’re up in very high numbers, and in Britain, much lower and in both Britain and the USA, the numbers saying yes have halved in the last 40 years. And I attribute this to the growth of individualism, and it’s interesting that on the Continent the numbers of people who think other people can be trusted has not fallen.

So by individualism I mean the belief – which I think is becoming increasingly spread about by teachers, parents, media – that your main duty is to make the most of yourself, make the most of your life; this may be where we’re going to disagree. The extreme version of this is that your job is to get ahead of other people. Getting ahead is a completely hopeless objective for a society because it’s impossible for everybody to get ahead of everybody else, it’s a zero sum game and we shouldn’t be getting people putting their energy into zero sum games. I want schools to teach people that their job is to contribute to the happiness of others and to find happiness from doing that. So I want schools to teach people that their job is to contribute to the happiness of others and to find happiness from doing that. My feeling, however, is that it’s difficult for schools on their own to change a society, or to change a culture. So I’m currently looking for a city. I think you could do this perhaps more at the level of a city. If you could get a city to decide that its aim was to be a friendly city in which people felt the world was a friendly place, that that was taught in schools, that that was the ethos of local services, how they related to citizens, ethos of the police, ethos in the NHS – if that was what employers thought was their job to help enable their workers to lead satisfying lives and to feel that the world was on their side; I think we could do an interesting experiment because we could measure the outcomes. What is this doing to mental health admissions? What is this doing to offending rates? Now Albert Einstein once said that the key question is whether the universe is a friendly place. I think that’s a rather big question, but I do think that the key question is whether the world is a friendly place, and I do think the government can do a lot to determine how we answer that question. Thank you. [Applause]

Layard simply cannot abide the thought of pluralism. His system rejects it like some kind of philosophical virus. Naturally, our values affect other people, since our values affect our behavior. So this means, what? To Layard it means that a centralized body, the public schools, must socially condition children to have the correct values, namely Layard’s. Or you take a whole city. Don’t you like how whole cities can have aims? Somehow I don’t imagine Layard thinking all the citizens agree on a common aim, namely Layard’s. Of course they don’t. That’s because some of them (most of them?) are just wrong! The city is a benevolant dictatorship that runs everything in people’s lives: the police, schools, all health care. When it is said that a city has an aim, it is meant that the benevolent dictator, namely Layard, has an aim. But we should be happy about that, since the dictator is benevolent! Benevolent dictators know the truth about the good as it is illuminated by “science” and use the institutions that run our lives in order to condition all of us to have the values that will lead us to want to make each other happy. Be careful not to want to make yourself happy! That’s individualism, and that’s bad. But if everybody is trying to make somebody else happy, then it’ll come back around to you!

This stuff is seriously noxious. Perhaps it occurs to Layard that the decline in trust in the US corresponds with the rise of the American welfare state, which is just to say, the breakdown of community through the externalization of responsibility. Layard is in the grip of the social democrat fantasy about macro-level solidarity. Somehow, somehow (namely, Layard in charge is how) state coercion in the name of the common good will awaken our better angels, make us believe that we’re all in it together, since we all understand that we’re being coerced for our own good, and the individualist scales will drop from our eyes as we are warmed to our core by our mutual commitment to the production of many and widely distributed hedons.

Layard’s totalizing technocratic mentality seems to make him blind to the idea that if we put responsibility back into the hands of individuals, families, and communities, we would discover solidarity and trust in the local social attachments, agreements, and norms that produce our private and public goods. When the state substitutes for the father of your children as a source of financial support, or for the support of your family in retirement, or for a church bake sale as a way of reparing the gym, or for fraternal societies as a form of mutual insurance, then it is exceedingly difficult for me to see how it is that the state initiatives are combating bad old individualism. When you think of “contributing to the happiness of others” mainly as voting righteously for higher taxes, or for banning television advertisements, which Layard would like to do, it’s hard to see how your “values” are really reweaving the fabric of social trust.

I wish I did not recognize Layard’s world, in which it is apparently no good to make people happy by creating things that they want to buy, in which there are no churches, no Cub Scouts, no Rotarians or Kiwanas. I know he doesn’t mean to do it, and would likely claim a Millian love of non-conformism, but Layard is simply brilliant at conjuring up visions of an antiseptic world in which children wear identical grey jumpsuits to their bland, but well-funded public schools, and come home to parents who are smiling, but slightly distant after having spent the afternoon being peacefully, psychochemically “reeducated”  by the ministry of public values for teaching false moral doctrines (mother was spotted with a Book of Mormon) to the children. After all, their values values affect all of us.

From the diaries of Gouverneur Morris:

He [Jacques Necker, French Finance Minister under Louis XVI]  is a man of genius, and his wife is a woman of sense. But neither of them has talents, or, rather, the talents of a great minister. His education as a banker has taught him to make tight bargains and put him upon his guard against projects. But though he understands man as a covetous creature, he does not understand mankind, a defect which is irremediable. He is utterly ignorant also of politics, by which I mean politics in the great sense, or that sublime science which embraces for its object the happiness of mankind. Consequently he neither knows what constitution to form nor how to obtain the consent of others to such as he wishes.

Politics: the sublime science of human happiness. Love it. Let it not be forgotten that Morris drafted the U.S. Constitution. And his diaries show that he understands mankind (and definitely womankind) all too well.  

A number of works I’ve seen on the importance of social comparison extrapolate in a fairly simple way from the existence of non-human dominance hierarchies to human status. (Frank, for instance, motivates his view of status by citing the general logic of competition for mates.)  Many go further and identify human status largely with position in the income distribution. Both moves are mistaken.

It’s fair enough to point out that humans are primates, and so we should see some continuity. But humans also have language, higher cognitive abilities, and complex, cumulative cultural transmission and evolution. Humans, like other primates, eat. But human eating takes place in a rich cultural context, and the expression of human eating behavior is thickly culturally mediated. Like chimps, we like meat. Unlike chimps, we worry about eating it with the "correct" hand, or utensil, etc. Some of us won’t eat certain foods because of culturally transmitted dietary taboos. One should expect that human social comparison and positional competition, even if it is universal, will also be thickly mediated by culture, and will be expressed in different ways in different cultures.

Furthermore, human status need not be a homologous to dominance. Here is anthropologist Joe Henrich in his paper with Franscisco Gil-White, "The Evolution of Prestige: freely conferred status as a mechanism for enhancing the benefits of cultural transmission." (Evolution and Human Behavior, 22, 1-32):

Although nonhuman status is still poorly understood, a single process appears at least strongly predominant: agonism (aggression, intimidation, violence, etc. — that is, force or force threat). The resulting social assymetries are referred to as "dominance hierarchies" in the ethological and behavioral ecology literatures. The privileges that accrue to dominant individuals are (1) in males, preferential reproductive access to females, food, and spaces, as well as disproportionate amount of grooming from others; (2) in females, preferential access to food and spaces, and disproportionate grooming. Despite some controversy, the evidence suggests that dominance correlates with fitness. (Cowlishaw & Dunbar, 1991; Ellis, 1995). The stability of dominance is often reinforced through "reminders": submissive behaviors (e.g., grooming, submissive displays, yielding space, etc.) from subordinate to superior, whether or not induced through intimidation by the latter.

In humans, in contrast, status and its perquisites often come from nonagonistic sources—in particular, from excellence in valued domains of activity, even without any credible claim to superior force. For example, paraplegic physicist Stephen Hawking—widely regarded as Einstein’s heir, and current occupant of Newton’s chair at Cambridge University—certainly enjoys high status throughout the world. Those who, like Hawking, achieve status by excelling in valued domains are often said to have "prestige."

Henrich’s argument is that prestige is a feature of the human cultural capacity, which is adaptive because it saves the cost of having to learn everything yourself. I’m going to just continue to quote as at length because this really makes sense to me:

Once some cultural transmission capacities exist, natural selection favors improved learning efficiencies, such as abilities to identify and preferentially copy models who are likely to possess better-than-average information. Moreover, selection will favor behaviors in the learner that lead to better learning environments, e.g., gaining greater frequency and intimacy of interaction with the model, plus his/her cooperation. Copiers thus evolve to provide all sorts of benefits (i.e., "deference") to targeted models in order to induce preferred models to grant greater access and cooperation. Such preferred models may be said to have prestige with respect to their "clients" (copiers).

The above implies that the most skilled/knowledgeable models will, on-average, end up with the biggest and most lavish clienteles, so the size and lavishness of a given model’s clientele (the prestige) provides a convenient and reliable proxy for that person’s information quality. Thus, selection favors clients who initially pick their models on the basis of the current deference distribution, refining their assessments of relative model worth as information becomes available through both social and individual learning. This strategy confers a potentially dramatic adaptive savings in the start-up costs of rank-biased social learning. Finally, because high-quality information ("expertise," "performative skills," "wisdom," "knowledge") brings fitness-enhancing deferential clients, models have an extra incentive to outexcel each other. 

Because status-as-prestige isn’t agonistic, there are clearly market-like gains from positional competition in a domain. There may be a fixed number of clients, and so competition for clientele may be zero-sum. But clients adopt models and defer to them because that makes them better off, not because of a threat. And insofar as reputation tends to tracks information quality, deference will be deserved.  

(The adaptive advantages of cultural transmission necessarily include  the danger of the success of maladaptive ideas. Boyd and Richerson explain why this must be the case in detail in Not By Gene’s Alone. On Tuesday, I heard a good talk by Bob Subrick on how witch doctors in Botswana have successfully undermined WHO education efforts to contain HIV/AIDS by promoting widely believed false folk theories about the cause and transmission of the disease. This clearly involves a maladaptive allocation of prestige.)

So, the fact that we have a cultural capacity at all makes space for non-agonistic comparative advantage-based prestige/status. It would seem to me to follow that market systems, by promoting the refinement of the division of labor, promotes the multiplication of dimensions of excellence and therefore prestige. It is possible in market systems to gain the benefits of prestige and clientele from becoming a highly desired graphic designer, marketing consultant, or musician. 

Additionally, the fact that we have a cultural capacity is going to imply that, unlike other primates, status competition is going to be highly mediated by culture. It is possible to gain status among Mormons by being a good Mormon. There may be heated competition, even bitterness, over who is the best Mormon in the ward ("She’s not really that good a mother!" "I paid my tithing plus five percent!" ), but such positional competition may serve on the whole to reinforce generally socially constructive norms. Indeed, it seems likely that one of the ways we judge the quality of a culture is by the way it mediates and channels potentially harmful universal human dispositions, such as status-seeking and tribalism. Mormon culture mediates status-seeking in generally beneficial ways. Redneck and ghetto culture doesn’t.

The degree to which our place in the distribution of income/wealth is going to correlate with our status depends on culture. Some cultures and sub-cultures are more materialistic than others. Some are pointedly anti-materialistic. It’s worth pointing out that comparative excellence style prestige is pretty clearly going to correlate with greater earnings in general. The higher the prestige in a domain, the fiercer the bidding from clients for access. That doesn’t have to mean higher incomes, but on the whole it will. In this kind of case, higher relative position in the income/wealth distribution will be tracking, more or less loosely, excellence/prestige on some other dimension. Our high relative position on that dimension may make us both happy and high on the income/wealth distribution. But that doesn’t imply we care much at all about the income/wealth distribution. (The world’s best guitarist may have a lot of guitars, but he’s getting more out of his status as the best guitarist, not as a guy who has a hell of a lot guitars.)

What is going to count as a positional externality is going to depend on what kind of position people care about. That’s a matter of the kind of culture they’re embedded in. It strikes me that policy types ought to take a step back and be willing to think about whether cultures and sub-cultures are in general peaceful, healthy, stable, and mutually beneficial. My colleague Jude Blanchette today gave me Alesina and Fuchs-Schundeln’s paper on the effects of communism on people’s preferences. They find that the longer people spent in communism, the more they prefer a heavily intervening state. What are we to make of that? Give them what they want because that’s what they prefer? Or ask whether a system that leads people to want that is a good one to have? Similarly with cultures and subcultures. If a culture mediates status-seeking in such a way that certain acts of aspiration, success, and upward mobility might plausibly be understood as a kind of negative externality, should we plunge in and attempt to "rectify" the externality and push for efficiency relative to those culturally laden preferences? Or should we stop and ask if there is anything we can do to ensure that a culture that engenders these preferences does not long survive? 

This is not an argument of any kind. I’m not trying to make a point. This is thinking out loud. And you are going to help me.

Anne and Betty each prefer to positionally dominate the other—they both like coming in first better than coming in second. However, each has a different hedonic payoff from positional domination and subordination. How do we think this through?

Which world state, A or B, does a benevolent planner choose?

In Pareto terms, the planner is indifferent. Both Anne and Betty prefer to come in first, but both can’t.  The Benthamite planner is also indifferent: same sum of hedons.

What about willingess to pay? Well, pay for what? Positional domination or hedons? When Layard says that people undermine their own welfare by seeking status despite the fact that it doesn’t make them "happy," it sort of sounds like he’s saying that people sometime value status more than they value hedons, but are wrong to do so. Let’s get rid of the normative judgment and think about what it could mean to value positional domination independent of hedons.

Suppose that whoever pays most to positionally dominate positionally dominates. You can have an auction. Anne’s highest bid is $2000 and Betty’s is $2700. So does that mean that Betty gets a bigger hedonic payoff from dominating. No, by the stipulation of the matrix, she doesn’t. (And by stipulation of the matrix, the distribution of hedons is not the dimension of positional competition.) So does this mean that Betty is willing to pay more for a hedon? Maybe, maybe not. Why think Betty is bidding on hedons? It could be that Anne and Betty value the marginal hedon at the exact same rate. In which case, Betty is just bidding for positional domination, which she values for its own sake, not for the hedons that fall out of domination.  

Or maybe you can think of the choices between A and B as choices between packages of hedons and positional domination, which are independently valuable, but causally connected. This is value pluralism. There are lots of independent values: hedons, positional domination, etc. The value-to-money and money-to-value exchange rates may not be the same for each value. (Or in each direction; the endowment effect for a hedon and a dollar may be different. Misers may trade hedons for dollars, on the assumption that the dollars will pay off in even greater hedons, but, when the time comes, they are unwilling to give up dollars for hedons, so the dollars just accumulate.) And the money worth of some values might decline on the margin faster than others.

Suppose that there is a point of hedonic saturation (I believe this is true.) At the point of saturation, an extra hedon will have no money value, since there is in some sense nowhere to put another hedon. (Hedonically saturated states dry up pretty quickly though.) Suppose that positional domination doesn’t saturate, and remains ever valuable. It is never enough to be mayor, or governor, or president, or ruler of earth; there is always value in dominating on another positional dimension, or dominating a dimension of broader scope. So, one could be hedonically saturated, and unwilling to pay for another hedon, but not be positionally saturated, and perfectly willing to pay to become Generalissimo of the solar system.  

Suppose the willingness-to-pay planner chooses world state B on the strength of the higher money value of positional domination to Betty. Is such a planner really benevolent? If coming in second is a positional externality imposed on Anne, what is the value of the externality.

Are you confused yet?

I am.

I have also caused myself to wonder whether it might be possible to take money away from people under one description, and give it back to them under another, resulting in a net gain in hedons Could be! The issue wouldn’t be the transfer per se, but the description under which the transfer takes place. (This has nothing obvious to do with the above.) Does support for the state depend on a kind of gratitude stemming from an (illusory for most people) sense that the value of public goods consumed is greater than taxes (direct and indirect) paid? It’s like thinking somebody’s your best friend since that gave you $4 bucks after they took $5 out of your wallet but gave you the $4 so warmly.

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Due to technical difficulties, this blog disappeared for a few days, but we’re back. More and more frequent happiness blogging shortly.