The Economics of Happiness
The Economics of Happiness
By Tom Green / adbusters.org

In the last few years, a growing number of economists have been discovering happiness. It's not that they are spending more time admiring flowers, helping old folks cross the road, dancing on the street or baking pies for neighbors. In fact, these happiness economists are working long hours in soul-numbing ways, torturing data with their latest econometric techniques to force deeply buried facts to the surface.

What is different is that these economists are revisiting old assumptions and asking new questions. They're not taking the neoclassical model of rational economic man for truth. They have been willing to learn from their colleagues in psychology. They have given up on the old assumption that the more you consume, the better off you are; instead, they are actually looking at the question empirically. Most importantly, they are bravely asking, "What factors make people happy?" It's another sign of the coming revolution in economics.

Not everyone is welcoming this new research program. The results are terrifying Milton Friedman's disciples. Consider this: once people have an annual income of about $10,000 per capita, further income does little to promote happiness. Worse yet, economic growth in most industrial nations, which has tripled or quadrupled our wealth since 1970, hasn't made us noticeably happier. In some countries, despite all this vast increase in wealth and consumption, folks are less happy than they were a generation ago.

I talked to Rafael Di Tella, an Argentinean economist at the Harvard Business School who is deeply involved in happiness research. Speaking from Buenos Aires, he explained, "Some of the very basic things we assumed in economics are not consistent with the evidence. This idea that income is so important to happiness is not correct. All the evidence seems to be pointing in the direction that we are working too much. In fact, we're happy if we work less. We are spending too much time on work and too little time with friends and family. So there's a mistake in the economic models that suggest happiness will come from more income."

How worried are those who believe society is but the sum of all the (selfish) individuals (with insatiable appetites) who square off in the market against powerful corporations freed of government control? Very worried. The Cato institute, a think tank based in Washington, DC, issued a 41-page brief attacking happiness research and its potential to undermine the "libertarian ideals" embodied in the US socioeconomic system. It countered with a creative interpretation of the data: "The happiness-based evidence points unambiguously to the conclusion that those of us lucky enough to live in the United States in 2007 are succeeding fairly well in the pursuit of happiness." Perhaps Cato also interprets the stats showing the millions of Americans on anti-depressants, the number of kids who show up at school without having had a decent breakfast, or the proportion of African-American men spending their days in prison as other signs their ideals are succeeding. Unfortunately for advocates of laissez-faire, the happiness evidence keeps knocking over more and more of the most cherished economic beliefs.

Lord Richard Layard is a distinguished British economist, Member of the House of Lords and a committed advocate for reorienting public policy towards the promotion of happiness. After reading his recent bookon the economics of happiness, I could not resist calling him up to learn first hand what his research would imply for Chicago-school economics.

"Economists often fail to think of the social externalities of the policies they promote," he noted, "Many economists suggest workers should be ready to move to where the high paying work is, since this would increase income. Workers who move a lot would destabilize the community and family life. This would tend to decrease trust and increase mental illness.

"Another example is when one person works harder to improve their income, and feels extra well-being from greater consumption. At the same time, they make their neighbors feel worse off, because the neighbors' relative income has worsened. Not only that, but the pollution caused by the extra consumption enabled by higher income also decreases happiness for the rest of society. So most economists worry about how taxes discourage people from working, but in fact, taxes can be encouraging people to have a less feverish pace of life and to focus more on time with friends and family rather than consumption."

It seems almost unimaginable that economists would be now thinking of ways to design the tax system so that we work less, consume less and value each other and the planet more. But Layard would not stop there. (Advertising executives be forewarned.)

"One of the keys to achieving happiness is to live appreciating what one has, rather than wanting more. It is important that we not be totally focused on wanting something that we don't have – that makes for unhappy people. So it's not at all healthy for children to be bombarded with stories on the box that make them feel that they have to have this particular brand of clothing or this particular toy or train or whatever it is, as if they can't be a decent human being without it." Layard even pointed to the value of Sweden's law prohibiting advertising to children.

The folks at Cato and their brethren at the Vancouver-based Fraser Institute are most alarmed by how economists are now training the happiness lens to examine the gap between rich and poor. As Layard explained, "It's a very simple fact that an extra dollar is worth more in terms of happiness to a poor person than to a rich person. We now have evidence that shows the extent of the difference, which is roughly that a dollar is worth 10 times more to a poor person than to a rich person whose income is 10 times higher. The value of an extra dollar to somebody is roughly inversely proportional to their income, such that a little more or a little less money makes so much more difference in happiness to a poor person than it does to a rich person."

For a 21st-century economist, what an outlandish idea! By spreading the wealth around a little more equitably, society's total happiness can go up. After all, a CEO who takes home $50 million a year could have 90 percent of it taxed away without their total number of smiles dropping by more than a couple dozen, while that same money would be enough to improve the lives of the entire population of a small city in Africa.

No wonder the folks at Cato and other neocon "think" tanks are fearful. Might we actually deal with the legions of homeless in rich countries more generously then dropping the odd coin in the soiled paper cups they hold up to us? Might we find a way to transfer some of the wealth that has flowed for so many decades from South to North in the opposite direction? Imagine a world where everyone lived on at least $4 a day, while a few people lived slightly less extravagantly. Might we increase the total happiness on this planet?

 

4.0 ·
1
What's Next
Trending Today
Dakota Access Pipeline Permit Denied
Nika Knight · 12,052 views today · 'For the first time in Native American history, they heard our voices.'
How Romanticism Ruined Love
5 min · 6,056 views today · The set of ideas we can call Romanticism is responsible for making our relationships extremely difficult. We shouldn’t give up on love; we should just recognize that it’s more...
All the News Is Fake!
3 min · 5,438 views today · Jonathan Pie finds nothing new in the idea of fake news.
How Mindfulness Empowers Us
2 min · 3,579 views today · Many traditions speak of the opposing forces within us, vying for our attention. Native American stories speak of two wolves, the angry wolf and the loving wolf, who both live...
93 Documentaries to Expand Your Consciousness
Films For Action · 2,748 views today · There are over 800 documentaries now cataloged in our library of social change films. That's probably way too many for any mortal to ever watch in a lifetime, let alone a few...
90 Inspiring and Visionary Films That Will Change How You See the World in Profound Ways
Tim Hjersted · 2,499 views today · The world today is in crisis. Everybody knows that. But what is driving this crisis? It's a story, a story that is destroying the world. It's a story about our relationship to...
Why Are Media Outlets Still Citing Discredited 'Fake News' Blacklist?
Adam Johnson · 1,951 views today · The Washington Post (11/24/16) last week published a front-page blockbuster that quickly went viral: Russia-promoted “fake news” had infiltrated the newsfeeds of 213 million...
Lifting the Veil:  Obama and the Failure of Capitalist Democracy (2011)
114 min · 1,664 views today · This film explores the historical role of the Democratic Party as the "graveyard of social movements", the massive influence of corporate finance in elections, the absurd...
Today I Rise: This Beautiful Short Film Is Like a Love Poem For Your Heart and Soul
4 min · 1,600 views today · "The world is missing what I am ready to give: My Wisdom, My Sweetness, My Love and My hunger for Peace." "Where are you? Where are you, little girl with broken wings but full...
United Natures: a United Nations of all Species (2013)
103 min · 1,457 views today · United Natures explores the Rights of Mother Earth, Environmental Philosophy, Wisdom, Spirituality and the potential for a Neo-indigenous future for humanity. Directed and...
Post-Brexit Visions of The Possible: It's Time to Imagine a New European Community
Martin Winiecki · 1,437 views today · We live in the beginning phase of a global revolution which will turn societal conditions upside down. We cannot stop this transformation, but we can influence where it will...
After Historic Protests, Army Corps of Engineers Blocks Current Route of the Dakota Access Pipeline
3 min · 1,401 views today · The $4 billion dollar project could still be approved by President-elect Donald Trump who is heavily invested in the pipeline. Help support The Real News by making a donation...
The Fight for Clean Water (#NoDAPL)
2 min · 1,024 views today · Clean water or Corporate profits? What’s more important? #NoDAPL Energy Transfer Partners: (214) 981-0700 U.S. Army Corps Of Engineers: (202) 761-0010; (202)...
The Orwellian War on Skepticism
Robert Parry · 985 views today · Official Washington’s rush into an Orwellian future is well underway as political and media bigwigs move to silence Internet voices of independence and dissent, reports Robert...
John Lennon's "Imagine," Made Into a Comic Strip
John Lennon. Art by Pablo Stanley · 979 views today · This is easily the best comic strip ever made.  Pabl
Projext X: Using Leaked Documents to Reveal the NSA's New York Spy Hub, Hidden in Plain Sight
10 min · 908 views today · A top-secret handbook takes viewers on an undercover journey to Titanpointe, the site of a hidden partnership. Narrated by Rami Malek and Michelle Williams, and based on...
Law Professor's Epic Response to Black Lives Matter Shirt Complaint
Social Design Notes · 769 views today · A first year law school student wrote a complaint about her professor having worn a Black Lives Matter T-shirt during class. The professor’s response is priceless. Scans of...
Where Do You Draw the Line? (2016)
60 min · 765 views today · Why is the Ecuadorian government proposing to extract oil in an area frequently classified by ecologists as one of the most bio-diverse rainforest regions left intact on earth?...
Twelve Things To Remember After The US Election, From Front Line Organizers
Bill Quigley · 667 views today · When you find yourself in a suddenly darkened room, what do you do?   Some rush blindly to where they think the door might be.  Others stand still, let their eyes get...
Bikini Was Just the Beginning, Bombs Still Threaten the Islanders
John Pilger · 654 views today · I was recently in the Marshall Islands, which lie in the middle of the Pacific Ocean, north of Australia and south of Hawaii. Whenever I tell people where I have been, they...
Load More
Like us on Facebook?
The Economics of Happiness