The Institute of Economic Affairs released a paper this week called …And the Pursuit of Happiness. In a nutshell, it argues that the government is wasting its time measuring happiness, because it is economic growth that makes people happy. It adds that we shouldn’t worry about inequality either, and that big government is bad.
In other words, it’s a stern reminder from the temples of economic orthodoxy: do not meddle with the markets, do not interrupt growth, do not ask questions. It would be easy to ignore, except that these sorts of papers are bound to be cited, repeatedly, by anyone whose purposes it serves. And it is wrong on many levels.
If you’ve been following this debate, you’ll know that this is a response to David Cameron’s new Index of National Happiness. The Prime Minister commissioned this last year from Britain’s Office of National Statistics, as a complementary metric and guide for policy making. It’s there to measure the many things that GDP can’t reflect, and the first results came out in November last year.
But, it’s got the Institute of Economic Affairs worried, probably because it suggests that the government might pay more attention to real people in future, and less attention to economists. The horror! So they’ve got together a collection of eminent contributors and issued this series of essays. Unfortunately, it either misunderstands or misrepresents the idea of wellbeing metrics throughout.
First, it begins by dismissing the credentials and sophistication of the wellbeing movement. “The scholars who first measured GDP realised from the outset that it had serious limitations” writes Paul Ormerod. “The same point applies to the happiness data, yet it is scarcely recognised by the proponents of happiness-based policies.” This is nonsense. There’s a long and ongoing debate about how to measure wellbeing and how useful ‘happiness’ actually is.
In fact, the way that the IEA uses ‘happiness’ and ‘wellbeing’ interchangeably shows that they haven’t done their homework. Happiness is just one part of wellbeing, which is a broader term that includes a sense of purpose, autonomy and resilience, quality of relationships, work satisfaction, and the ability to contribute meaningfully to society. This is reflected in the differing hedonic and eudaimonic approaches within the movement. The first asks ‘are people happy?’ and is concerned with reported feelings. The second asks ‘are people flourishing?’ and looks at individual and social functioning too. The IEA are apparently unaware of the more sophisticated and holistic approach.
Having over-simplified the debate, the paper then sets up a false choice, pitting the ‘wellbeing agenda’ against the growth agenda. The whole first section is called ‘GDP or GWB?’ as if it’s an either/or situation. “The wellbeing movement” worries Ormerod, “suggests replacing GDP altogether with a measure which purports to describe not the material prosperity of a population, but its happiness.” Does it? Surely no single metric can sum up progress, and a wellbeing index would have to be used as part of a broad set of measurements including life expectancy, levels of literacy, ecological footprints and yes, GDP.
Then we get to the original research, where the team attempt to disprove the long-running observation that increased wealth delivers diminishing returns once people reach a point of satiation. So you get graphs like this one, that shows life satisfaction plotted against income. “Our graphical analysis suggests that subjective wellbeing rises with the log of income” they say.
But note that the horizontal axis here is a log scale – it doubles with each move to the left. What this graph actually demonstrates is that as GDP rises, it takes ever larger increases in income to deliver greater satisfaction. According to the graph, someone on an income of $64,000 would need to double that to $128,000 to see the same degree of satisfaction that someone on $2,000 would get from a rise to $4,000. That looks a lot like the law of diminishing returns to me, just disguised by the choice of visual presentation.
Next Christopher Snowdon contributes an essay on how there is no evidence that people living in more equal countries are happier. On this he’s correct, but inequality can be linked with a whole host of social ills. There is overwhelming evidence to suggest that more equal societies do better, and the absence of happiness among the many benefits of equality doesn’t weaken the case at all. Greater equality also guarantees a slice of any of that much-prized GDP growth that the IEA seeks to champion.
Finally, the paper turns to wellbeing and government intervention. Here it makes a rather bizarre assumption: that pursuing wellbeing means big government and central planning. This is daft, especially considering that David Cameron is the main target of the paper, and he is an advocate of both wellbeing and small government. “Larger government does not imply a happier population” writes Christian Bjørnskov soberly, as if there was anyone, anywhere in the world going “why am I so unhappy? I know, it must be because the government is too small.”
Having belittled the wellbeing movement, then oversimplified it and hashed the data, the monograph concludes by taking the worst possible interpretation of its motives. Wellbeing advocates aren’t just social scientists wondering why it’s so wrong to ask if economic growth means actual progress. They’re utilitarian utopians who believe that happiness can be centrally planned by totalitarian governments. The editor even admits this is a flawed argument, but then concludes with it anyway. “The reader may consider that this is knocking down a straw man and that nobody seriously believes that societies should be centrally planned to maximise happiness, just as nobody really believes these days in centrally planning an economy to maximise wealth.” Exactly, so let’s stop there shall we?
Finally, the monograph doesn’t maintain a coherent position across its many authors, and manages to contradicts itself. One section decides that wellbeing research does have some value: “we conclude that subjective wellbeing data is indeed likely to be useful in assessing trends in global wellbeing.” But nobody briefed Pedro Schwartz. “Happiness economics” he decides, “must be pronounced an unworkable project”. Likewise one statistical section claims a “positive but somewhat less precise relationship between growth in subjective wellbeing and growth in GDP”, while another admits that no link exists. “The mere fact that economists have, hitherto, found little evidence of happiness increasing with income does not mean that happiness does not increase with income – it could also mean that the evidence has not yet been found” says Philip Booth.
Ultimately, …and the Pursuit of Happiness is a work of ideology, of economic dogma. It is riddled with big government paranoia and fear of redistribution, pro-growth tub-thumping and faith in the markets. Which is a shame, because if the Institute of Economic Affairs hadn’t been so determined to see wellbeing economics as a threat, there could have been some genuine engagement with the issues. Instead, it comes across as a defensive, knee-jerk reaction from an economic philosophy that knows it has no place in the 21st century.