Happiness and Economic Growth
My piece on happiness and economic growth in this month’s non-American Prospect has escaped from behind the paywall and is now available for your cost-free reading pleasure. I have to say I’m pretty psyched that my kitten-strapped-to-a-guillotine-connected-to-a-bicycle analogy came through intact:
The fact that average self-reported happiness has not risen with average incomes does not imply that there is no point in becoming richer. A steady rate of growth may be necessary to keep happiness and other good things at a high stable level. (Imagine a guillotine, on which a kitten is strapped, connected to a bicycle that must be pedalled ever more quickly to keep the blade aloft. Slow down, and the kitten gets it.) In The Moral Consequences of Economic Growth, Harvard economist Benjamin Friedman argues that steady economic growth “fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy”—a list I doubt any politician would come out against.
I assure you that it all makes sense in context.
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Will, you mention in your article that “what does it mean in practical terms to profess allegiance to GDH when the happiness data are too coarse to say anything about how best to reform the healthcare system, whether we ought to go to war in Iraq, or raise welfare benefits? Not much”
However, there have been some recent attempts to place well-being within the realms of public policy (e.g. http://www.defra.gov.uk/science/Project_Data/DocumentLibrary/SD12005/SD12005_4017_FRP.pdf). This is exactly the focus of my PhD, with Professor Paul Dolan, to determine how good a tool is SWB is for public policy uses.
Economists Are Destroying America
Economists, politicians, and executives from both parties have promised American families that “free” trade policies like NAFTA, CAFTA, and WTO/CHINA would accomplish three things:
• Increase wages
• Create trade surpluses (for the US)
• Reduce illegal immigration
Well, their trade policies have been in effect for about 15 years. Let’s review the results:
• Declining real wages for 80% of working Americans (while healthcare, education, and childcare costs skyrocket)
• A record-high 46 million Americans who don’t have health insurance (due in part to declining wages and benefits)
• Illegal immigration out of control
• Soaring trade deficits, much with countries that use slave and child labor
• Personal and national debt both out-of-control
• Global environments threatened by lax trade deal enforcement
Economists Keep Advocating Policies That Aren’t Working
Upon seeing incontrovertible evidence of these negative trade agreement results, economists continue with Pollyannish blather. Some say, “Cheer up! GDP is up and the stock market’s doing fine.” Others say, “Be patient. Stay the course. Free trade will raise all ships.”
Even those economists who acknowledge problems with trade agreements offer us only half-measures—adjusting exchange rates, improving safety nets, and providing better job retraining. None of these will close the wage gap in America—and economists know it.
Why Aren’t American Economists Shouting From Street Corners?
America needs trade deals that support American families and businesses in terms of wage, environmental, and intellectual property abuses. Why aren’t economists demanding renegotiation of our trade deals? There are three primary reasons:
• Economists are too beholden to corporations and special interests that provide them with research grants.
• Economists believe—but refuse to admit—that sacrificing the American middle class is necessary and appropriate to generate gains in third world economies.
• Economists refuse to admit they make mistakes.
Economic Ambulance Chasers
Now more than ever, Americans need their economists to speak truth and stand up to their big business clients. Instead, economists sound like lawyers caught chasing ambulances: they claim they’re “doing it for our benefit”.
Will, I enjoyed your Prospect article, but I’m unsure which worries me most – that I may be a closet Thatcherite or that I’d be willing to let the poor innocent kitten meet its gruesome end.
You ask what does allegiance to the Gross Domestic Happiness agenda mean - well personally it’s a recognition, firstly, that economic theory based on utility functions in which utility (or well-being) is solely dependent upon an individuals income will be misguided and secondly, that despite the potential for measurement error in subjective well-being survey responses using these to represent well-being appears to be less problematic than clinging to the assumption that we can judge changes in an individuals well-being through their behaviour because behaviour is usually derived from rational, well-informed, selfish preferences.
I agree with your comment that the there is the potential for researchers to “look into the data and see our own ideology reflected”, but when the same finding is replicated over and over again by different researchers, using slightly different methods, on different datasets then surely we can begin to have confidence in these findings.
For example, research consistently shows that experiencing unemployment is harmful to subjective well-being (SWB) and has not been fully compensated for by unemployment benefits, that stable intimate relationships enhance SWB, and that health is strongly related to SWB. It also offers some indications that inequality, higher unemployment rates, and long commutes are harmful whereas relationships with friends and neighbours, community and civic involvement, trust in government, more generous welfare payments, and democracy enhance our SWB.
Given that this type of research is still really only in its infancy doesn’t this give us sufficient reason to be optimistic about the contribution it could make towards policy in the future? It may not yet be able to tell use how best to reform the healthcare system, but the use of well-being outcome measures rather than health-related quality of life measures (or QALYs) has promise. Measuring the impact of illness and treatment based on the full effect on the lives of patients and their family should lead to more efficient allocation of health care resources.
As for war with Iraq, I wouldn’t expect the current well-being of British citizens to determine international policy, or for that matter determine national policy which impacts upon future generations. Accurate predictions of the impact on well-being will not always be possible, leading decisions to be based not upon outcomes but basic values such as fairness and justice.
So why let the kitten snuff it. In all the areas of uncertainty in the happiness research, the impact of income on SWB is unfortunately still high in the list. If part of the Easterlin Paradox can be explained by adaptation to new levels of income then constant income growth may bring higher levels of SWB. Yet that still does not address the fact that much of the benefit of higher incomes arises from an improvement of relative position rather than actual income. There is fairly good evidence that some kind of relative income effect is in operation, even if exactly how it operates is yet to be clearly established. If relative income effects operate between country borders then the positive effect of GDP/capita may still be a relative rather than absolute income effect. If we are all on some local, national or international zero sum game, whilst it might be in each individuals interest to keep expanding their income and consumption, from a macro perspective this is a appallingly inefficient use of the worlds resources. We destroy the planet in order simply to stay still. Sorry but the kitten has to go.
The happiness research may not have all the answers yet. But it already suggests some fairly dramatic shifting of priorities. I can’t help but wonder if David Cameron realises what he’s signed up to.
I think this posting is asking the right kind of question.
The comparison should probably be between countries experiencing steady economic growth and countries experiencing steady economic contraction. Staying the same isn’t an option.
Modernizing societies (liberal democracies) need to growth to remain viable - perhaps there is another interesting question about happiness in relatino to rates of growth, or rates of growth interacting with the per capita GDP.
My impression is that economic decline makes people unhappy (because it correlates with all kinds of misery-inducing social problems), but the reverse may not be true.
Who really now is engaged in the control of health? To mine it neglected the large pharmaceutical companies and the medical centers. There should be a centralized management WBR LeoP
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