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Here’s an interesting article by John Lloyd. Finally the economists realise it’s not all about money!
People in the west . . . have in the past 50 years . . . become much richer, they work much less, they have longer holidays, they travel more, they live longer and they are healthier. But they are not more happy. – Lord Layard, Lionel Robbins Memorial Lecture, March 3, 2003
Doleful though the profession is, economics has in recent years taken a turn away from the dark side. Happiness is now seen as a legitimate – even a necessary – object of study. The (happy) few who have colonised the field claim a revolution in perception and, in time, policy.
Yet they are still distrusted by many and seen as precious and vague by many more who believe economists should confine their studies to the fundamental problems of the economy. “I hate to see this as a trend,” harrumphs Irwin Stelzer, the influential neo-conservative economist, “though I suppose it is. It has a legitimate side – that is, of incorporating a measure of externalities like pollution into the costs of growth. But the illegitimate side of it is the nonsense of trying to measure happiness. Even our [US] constitution doesn’t guarantee happiness: just its pursuit. These people want to legislate for it.”
Paul Dolan, head of the Centre for Well-being in Public Policy, at Sheffield University (a centre he engagingly describes as “really just me”), admits that it is “still seen as a crazy part of economics, with soft and woolly data, not like GDP, inflation, unemployment. But is happiness a luxury good, only able to be studied once inflation is tamed? No, I don’t think so.”
Its growth has come about, in part, through miscegenation. Other disciplines, such as neuroscience, evolutionary biology and psychology, have bred with economics and their offspring have taken new paths. Above all, psychology has entered into the econometric equations, with insights and demands economists now think they can collaborate in solving.
The 2002 Nobel Prize for economics was awarded to the Princeton psychologist Daniel Kahneman for work that (according to the citation) “has inspired a new generation of researchers in economics and finance to enrich economic theory using insights from cognitive psychology into intrinsic human motivation”. David Blanchflower of Dartmouth College, New Hampshire, a long-time student of happiness (who has sought to compute the monetary worth of sex), next month joins the rate-setting Monetary Policy Committee of the Bank of England. Both developments imply a measure of official recognition for the more jocund branch of the dismal science.
Most economists, whether for or against happiness, agree on three things. The first is that a consensus now exists on the best way to run a market economy, leaving economists with time and intellectual space to explore other avenues.
Second, vast new data sets now exist, which give information across time on lifestyles, preferences and subjective feelings. This is allied to advances in processing power that mean economists – who as recently as the late eighties were still having to wait in line to grab a few minutes on their department’s single computer – can run regression analyses on their laptops after dinner.
Third, the public appetite for this kind of information is now sharper than it has ever been. Charles Murray, whose 1994 book The Bell Curve roused a storm of controversy because it posited a link between IQ and race, says there is “now an interest in this stuff much more broadly – in stuff that people can understand. The Bell Curve sold 300,000 copies in part because of the controversy, but more because people wanted to know about controversial issues which touched their lives. And it was only possible because of the existence of data bases, like those on SAT [intelligence] tests.”
Murray would claim the status of (sceptical) pioneer in this field with a 1988 book, In Pursuit of Happiness and Good Government. An even earlier, and lonelier, furrow was ploughed by Richard Easterlin, at the University of Southern California in Los Angeles, in the 1970s. But it was only in the 1990s and 2000s that the work of these early pioneers coalesced into a movement.
Andrew Oswald, a much-cited happiness researcher who is professor of economics at the UK’s Warwick University, recalls: “I put together a conference on happiness at the London School of Economics in 1993. My colleagues thought I was away with the fairies: almost no one came. In March I did a symposium on the economics of happiness with Easterlin at USC and we had participants from all over the US and Europe.”
But, aside from its curiosity value, does this branch of study make any serious contribution to public policy? Adair Turner, the merchant banker who led the UK Pensions Commission, says the broadening of the economics agenda is especially marked in the UK, and reveals that he used its methods and insights in his commission’s work.
“The use of other disciplines with economics mean we are now asking questions about how people really think, and what makes them really happy. Economists used to say: assume a rational decision. Now we want to see how decisions are made in the real world. We used behavioural economics in the Pensions Commission to ask: ‘How do people make savings decisions?’ The rational approach is often not what people do. It’s determined by what they know, whom they trust and when they make the decision.”
However, he believes that governments have yet to embrace it. “The belief of all treasuries is, I would think, in things which are rational and measurable: they are still in the growth-equals-happiness mode. One must admit that the use of these measures gives government economists status at international conferences.” Paul Dolan, at Sheffield, demurs: “I think it is coming bit by bit into government in the UK. There’s an inter-departmental group in Whitehall on well-being; and the Department of the Environment has a review of measures of well-being.”
Stephen Jenkins, head of the Institute for Social and Economic Research at Essex University, adds that “as the issues like child poverty and income inequality have become more salient, as they have under this government, there’s more work being done on the causes and the effects of these things – such as not being able to participate fully in society”.
Perhaps the most influential of the “happiness” researchers has been Richard Layard, the LSE economist whose work on negative income tax has influenced Gordon Brown, the British chancellor of the exchequer, in the latter’s design of poverty programmes. The study of happiness is now his principal academic focus.
In 2005 he published Happiness: Lessons from a New Science – a book that seeks to put human satisfaction at the centre of human concerns, displacing the quantitative approach of earlier generations of economists.
In a series of lectures in March 2003 on happiness, Lord Layard claimed that the new work marked an epochal break both with the utilitarian tradition of Jeremy Bentham (with which, at first glance, his work could be compared), which claimed that everyone experienced happiness in the same way; and even more with the 20th-century economics of Lionel Robbins and others, which saw economics as focused on rational choices in a world of scarcity. Now, he claimed, with breakthroughs in psychology and anthropology, “people concerned with policy can revert to the task of maximising the sum of human well-being, based on a steadily improving social science”.
In the same lecture, Lord Layard also noted what is a common finding among the happiness set: that more money does make you happy – if you are poor. Pointing to data collected from rich and poor states, Lord Layard said that once a country has over $15,000 per head – a figure revised to $20,000 in the most recent edition of Happiness – “its level of happiness appears to be independent of its income per head. For poorer countries, there is a clear impact of income on happiness . . . when you are near the breadline, income really does matter.”
He and the other researchers also find that humans are envious: that even if, in rich countries, they are not happy just because they have more, they are happy when they know they have more than others. A pay rise, in other words, is much more pleasurable if you alone receive it. In an interview with the BBC last year, Lord Layard referred to an experiment conducted with US students, which discovered that, given a choice of two states, “they preferred to be poorer so long as they were better off than other people. That’s a very standard kind of finding . . . that’s the thing which is cancelling out the gain from our own increase in income as we go through time.”
Lord Layard has paid particular attention to those who experience incapacitating bouts of depression – yet are not regarded as clinically depressed and usually do not receive, nor even seek, assistance. He has persuaded the UK government to pilot therapies for such people, arguing (on utilitarian grounds) that such dramatic states of unhappiness decrease the productivity of the whole society.
There remains, of course, the elephant in the room: how do you reach a definition of so essentially subjective a state as happiness? Isn’t it very different from person to person or at least from culture to culture? Lord Layard rejects the quibble, noting that whatever measure is used – whether happiness or satisfaction or a scale from “worst” to “best” – all findings show the same patterns. He says he does not want to promote an authoritarianism of joy, of the kind adumbrated by Aldous Huxley in Brave New World. To discover what gives happiness is, he says, an anti-authoritarian project.
This is not, however, enough to satisfy the sceptics – especially economists of a conservative bent such as Messrs Stelzer and Murray, who view the movement as thinly disguised socialism.
Says Mr Murray: “The stuff I’ve seen so far on happiness concerns what I would call a European version of happiness. That is, the purpose of life is to while it away as pleasantly as possible. Whichever country has the longer holidays is best. What the economists don’t ask is what constitutes a satisfying life? When you ask that question, people tend to say their vocation; their family; their community. And for people who don’t have much of a vocation, the last two are very important.”
He may be too harsh a critic. In truth, the consensus among happiness researchers is just that: family, friends and community tend to be the most important things in life.
It may be fairer to ask whether the weight of economic theory is necessary to reveal such a blindingly obvious human truth. Perhaps not – but they can play a real role in calculating its implications for public policy.
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