Happiness & Public Policy

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.