Monday, April 02, 2007

Unhappy About Happiness

Richer but apparently no happier

Last week I did something I knew would make me unhappy. I attended a lecture on Happiness Economics.

It wasn’t any old lecture either- this one was given to the splendid Economic Research Council by Professor David Blanchflower (a distinguished labour market economist and member of the Bank's Monetary Policy Committee).

Now for those of you who don’t know what Happiness Economics is, it’s a last desperate bid by the dismal science to make some friends. A bit like, say, a nasty political party taking up hugging and wind turbines.

There’s a brief non-technical introduction here by Andrew Oswald, another of Britain's top happiness academics, and Blanchflower's research partner. In essence, it says:
  • Money can make you happy, but…

  • only a bit, and...

  • your possession of money makes others unhappy, and…

  • we’d all be happier if we worked less and took more holiday, unless…

  • we’re unemployed, in which case we'd be a whole lot happier if we got a job

How do we know these things? That’s what I wanted to find out from the Prof. And in fairness, his lecture was stuffed full of interesting nuggets. Like:

  • all over the world pollsters are asking people how happy they feel (they’ve never asked me- maybe I look too miserable)

  • their entirely subjective answers seem to correlate with some intuitively obvious, observable, and arguably, objective facts- like if you’re sick, on average you feel less happy than if you’re well

  • despite countries getting much richer over the last century, overall perceived happiness hasn’t increased

  • people get less and less happy from childhood through to the pit of their forties; thereafter they get happier and happier: by the time they take the final curtain, all those supposedly grumpy old men are positively chortling with delight

  • Eastern Europeans are less happy than Western Europeans

  • the Scots are even more miserable than we English, but that may be because with all those fags and deep fried pints of heavy they’re also much sicker

  • marriage- especially long-lasting marriage- makes you happy

At which point I squawked “yes, but what about causation in all this?” (well, somebody had to). What if happier people are just better at getting married and staying married? And better able to earn more money etc etc? In fairness, the Prof said he worried about that too.

I also asked about policy implications, and there he was non-committal.

Shame. Because that’s the bit that makes me really very unhappy.

Try this well-worn “positional” question:

In which of these alternative worlds would you prefer to live?

A) you earn £50,000 and everybody else earns only half that; or
B) you earn £100,000 but everybody else earns twice that

Obviously you’re twice as well off in World B. But only at the “cost” of going from being the rich neighbour, to being the poor neighbour.

Got your answer?

As you may know, most people choose World A. Even though their income is only half that of World B. It’s that old green eyed business again, aka the politics of envy. And the really awful thing is that most of us recognise it as being true.

Now, some of the new followers of happiness draw a very simple policy conclusion from this: since your high income harms the happiness of others, the government should take at least some of it away.

Lord (and longtime LSE prof) Richard Layard is one of them. Among many other things, he says:

"If we compare states in the USA we find that, if other people in your state get more, you do feel worse off... To be precise, if my income increases, the loss of happiness to everybody else is about 30% of the gain in happiness to me.

This is a form of pollution, and to discourage excessive pollution, the polluter should pay for the disbenefit he causes. So the polluter should lose 30 pence out of every 100 pence that he earns – a tax rate of 30% on all additional income." [which I understand to mean 30% additional tax on top of what everyone else is paying]

Now although he's a Labour peer, I have the utmost respect for Prof Layard. Many years ago he taught me economics- with much emphasis on correcting markets for standard "externalities" like paper mills polluting rivers- and a nicer and brighter man you couldn't hope to meet.

But the problem we have here is surely the same old one: levying additional taxes will disincentivise effort and enterprise. And although Prof Layard sees that as an objective- to stop people working too hard and long- it seems to me to be taking one huge risk with our material prosperity.

The reality is, although we may have collected a whole pile of interesting polling data, and although some very bright people are hard at work refashioning their elegant economic models to include it, we have absolutely no idea what weight it might bear.

Still less do we have any idea how tinkering with the "distribution of happiness" would impact on the real world. It's hard enough predicting the impact of existing policies aimed at redistributing simple measurable cash, let alone unmeasurable (non-additive) happiness.

So we need to take all of this with a massive pile of salt. And hopefully everybody knows that.

Except... what would be really really bad would be if, say, some previously nasty party promised, for shallow electoral positioning reasons, to dump GDP in favour of General Well Being. And then, because they got more popular, actually started to believe it was all somehow real. And then even got elected. And then actually tried to implement it.

That would be really REALLY bad.

So bad, it surely couldn't happen.

Could it?

PS We Brits turn out to be not nearly as miserable as you might think. Despite all those long EU regulation busting hours, and the fact that we're ruled by a preening high-taxing fantasist, we stack up very well against the misery-guts French and Germans. Which is the main thing.

Footnote: Charts taken from Happiness and wellbeing across nations, Blanchflower, 2006.

PPS When the ERC chairman introduced Prof Blanchflower, he gave us an excellent potted history of the Prof's life and career. But he unaccountably failed to mention his other big claim to fame, as set out in Wiki. I'm sure it would have got him even more attention.

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