Wednesday, April 16, 2014
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19

Happiness Is Equality

LONDON – The king of Bhutan wants to make us all happier. Governments, he says, should aim to maximize their people’s Gross National Happiness rather than their Gross National Product. Does this new emphasis on happiness represent a shift or just a passing fad?

It is easy to see why governments should de-emphasize economic growth when it is proving so elusive. The eurozone is not expected to grow at all this year. The British economy is contracting. Greece’s economy has been shrinking for years. Even China is expected to slow down. Why not give up growth and enjoy what we have?

No doubt this mood will pass when growth revives, as it is bound to. Nevertheless, a deeper shift in attitude toward growth has occurred, which is likely to make it a less important lodestar in the future – especially in rich countries.

The first factor to undermine the pursuit of growth was concern about its sustainability. Can we continue growing at the old rate without endangering our future?

When people started talking about the “natural” limits to growth in the 1970’s, they meant the impending exhaustion of food and non-renewable natural resources. Recently the debate has shifted to carbon emissions. As the Stern Review of 2006 emphasized, we must sacrifice some growth today to ensure that we do not all fry tomorrow.

Curiously, the one taboo area in this discussion is population. The fewer people there are, the less risk we face of heating up the planet. But, instead of accepting the natural decline in their populations, rich-country governments absorb more and more people to hold down wages and thereby grow faster.

A more recent concern focuses on the disappointing results of growth. It is increasingly understood that growth does not necessarily increase our sense of well-being. So why continue to grow?

The groundwork for this question was laid some time ago. In 1974, the economist Richard Easterlin published a famous paper, “Does Economic Growth Improve the Human Lot? Some Empirical Evidence.” After correlating per capita income and self-reported happiness levels across a number of countries, he reached a startling conclusion: probably not.

Above a rather low level of income (enough to satisfy basic needs), Easterlin found no correlation between happiness and GNP per head. In other words, GNP is a poor measure of life satisfaction.

That finding reinforced efforts to devise alternative indexes. In 1972, two economists, William Nordhaus and James Tobin, introduced a measure that they called “Net Economic Welfare,” obtained by deducting from GNP “bad” outputs, like pollution, and adding non-market activities, like leisure. They showed that a society with more leisure and less work could have as much welfare as one with more work – and therefore more GNP – and less leisure.

More recent metrics have tried to incorporate a wider range of “quality of life” indicators. The trouble is that you can measure quantity of stuff, but not quality of life. How one combines quantity and quality in some index of “life satisfaction” is a matter of morals rather than economics, so it is not surprising that most economists stick to their quantitative measures of “welfare.”

But another finding has also started to influence the current debate on growth: poor people within a country are less happy than rich people. In other words, above a low level of sufficiency, peoples’ happiness levels are determined much less by their absolute income than by their income relative to some reference group. We constantly compare our lot with that of others, feeling either superior or inferior, whatever our income level; well-being depends more on how the fruits of growth are distributed than on their absolute amount.

Put another way, what matters for life satisfaction is the growth not of mean income but of median income – the income of the typical person. Consider a population of ten people (say, a factory) in which the managing director earns $150,000 a year and the other nine, all workers, earn $10,000 each. The mean average of their incomes is $25,000, but 90% earn $10,000. With this kind of income distribution, it would be surprising if growth increased the typical person’s sense of well-being.

That is not an idle example. In rich societies over the last three decades, mean incomes have been rising steadily, but typical incomes have been stagnating or even falling. In other words, a minority – a very small minority in countries like the United States and Britain – has captured most of the gains of growth. In such cases, it is not more growth that we want, but more equality.

More equality would not only produce the contentment that flows from more security and better health, but also the satisfaction that flows from having more leisure, more time with family and friends, more respect from one's fellows, and more lifestyle choices. Great inequality makes us hungrier for goods than we would otherwise be, by constantly reminding us that we have less than the next person. We live in a pushy society with turbo-charged fathers and “tiger” mothers, constantly goading themselves and their children to “get ahead.”

The nineteenth-century philosopher John Stuart Mill had a more civilized view:

“I confess I am not charmed with the ideal of life held out by those who think…that the trampling, crushing, elbowing, and treading on each other's heels, which form the existing type of social life, are the most desirable lot of human kind….The best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back, by the efforts of others to push themselves forward.”

That lesson has been lost on most economists today, but not on the king of Bhutan – or on the many people who have come to recognize the limits of quantifiable wealth.

Read more from our "In Keynes's Footsteps" Focal Point.

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  1. CommentedNiko Kotonika

    Mr Skidelski what is equality? We are all equal before the law and that is important. It is obvious that the recent wealth inequality is hugely driven by QE, which in turn ended up in a huge stock market rally, if stocks go up inequality increases because only a few people own stocks. I think equality should not be a target. More important indicators should be the level of poverty, unemployment and so on. If you follow the philosophy of making every one equal you are endorsing communism, which turned to e be a total disaster with massive poverty and totalitarian states. I come from a country where communism was in power for 50 years, with one of the ruthless dictatorships ever. And believe me inequality is much better than equality.

  2. CommentedGustavo Caballero

    This idea was introduced by Professor Duesenberry in the late 1940's. Sadly, the alternative of the only self-regarding individual became the mainstream impacting most of the economic research and analysis. This only suggests retaking these ideas and reevaluate our analysis.

  3. CommentedNicolas Bollion

    The median family income in the us has hardly risen over the past decades. That is true. But the size of this family has fallen too. In addition, high wage earners are now more often married to other high wage earners than before and since there are more singles now, richer people share less of their income with people with smaller earnings. Don't forget the effect of immigration. The us has absorbed more immigrants than any other industrialized country. This causes a growth of the number of people in the lowest income brackets. As a result, everybody's income can increase while the median remains steady. Equality does matter but I'd call some economists like this author, Krugman, Stiglitz,.... not to use the subject to advance a political agenda.

  4. CommentedEnrique Woll Battistini

    I fail to see how increased levels of equality would lead to more security -except if contributed to ending poverty and envy and thus theft and financial crime- or to better health -except if it contributed to ending envy and thus mental health- or to more leisure and time with family and friends or to more respect from one's fellows and to more lifestyle choices -except if it contributed to not only ending poverty but people's desire to have more and actually to increased wealth... More important than more equality is less extreme poverty and less poverty in absolute terms. Envy is a moral matter and can be dealt with separately. On the other hand, without a natural level of inequality, as in the case of the natural level sof inflation and unemployment, the spark that lights the fuel of inventiveness, productivity, and competition would die out and social and political development, not just economic, that would enable true well-being, would cease. We would all be Eloi, locked into a static world of fantastic equality, without any Morlocks to feed us; only to eat us.

  5. CommentedPaul Schaafsma

    One incredibly rich source of information and insight about this subject is the documentary "Happy," directed by Rokyo Belic.
    The film explores the emerging 'science of happiness' in interviews with leading researches in the social and physical sciences. Their findings are brought to light through encounters with some of the happiest - and unhappiest - people in the world.
    There's a great discussion of the film and it's discoveries here: http://greatergood.berkeley.edu/article/item/the_science_of_happiness_coming_soon_to_a_theater_near_you/
    The documentary's website is: http://www.thehappymovie.com/

  6. CommentedCarlos Avendano

    "In praise of idleness", as the great Bertrand Russell wrote decades ago. Or in a more updated version: "Mais sambar e menos travalhar" (more samba and less work), as Brazilians like to remind us :-)

  7. CommentedRock Steady

    Ultimately, I buy the argument that economic growth as defined by percentage change in GDP/GNP is only a means to something more fundamental: the well-being and welfare of the greatest number of people possible within a given polity. Growth serves happiness or the pursuit thereof; therefore, happiness is a much more apt metric to determine the success, or lack thereof, of a political economic system. Shouldn't societies target "net" or "median" happiness? And if we believe this, how should we go about it? Programs and policies that promote a balance between economic fairness, equality and innovation would seem to be a good start in my humble opinion.

  8. CommentedMark Pitts

    There are still 5 Billion people living in poverty. Without significant quantitative economic growth, they are doomed.
    Those who oppose grow are indifferent to the suffering of the world's poorest people.

  9. CommentedMark Pitts

    I will believe the king of Bhutan is sincere when he gives all his money to the poor and abdicates. Otherwise, it looks like just another load of hypocricy.
    Everyone wants more equality and higher taxes - as long as other people pay the price.

  10. CommentedJohn Brian Shannon

    Hi Robert,

    Thank you for this line; "No doubt this mood will pass when growth revives, as it is bound to."

    I laughed out loud. Great shot!

    However, quite aside from entertaining, I believe your article is profound and it may indeed be a fortuitous turn of events which have conspired to cause us all to consider our relative happiness.

    (It is always worthwhile to take some time to ponder, after the storm)

    In the mindless 'rat-race' as it has been called, the drive to get more 'things' how many Westerners have become happier?

    Well, the 1% are certainly happier! Possibly the top 20%, but the rest are worse off qualitatively and quantitatively. And they know it.

    For example, does it matter that a person drives a Toyota Corolla? Not really, they are reliable and safe cars by all accounts. But when the neighbour down the street races past every day with his brand-new Ferrari, then it does matter.

    From that point on, it is all psychology.

    The Ferrari driver feels justified and imagines he has earned the right. While the neighbours wonder if he got that money by being a drug-dealer, a Wall St. banker, a corporate welfare bum, a ponzi-schemer or other fraud artist.

    At some point, there WILL be a confrontation. And one side will blurt out something along the lines of; "Well, let them eat cake." while the other side will likely retort with "Off with his head."

    Even the most cursory reading of history proves this to be true. So many times, capital accrues at the top often with the assistance of plutocrats, or industry-specific interests (the Robber Barons, for one example) which further enrages the electorate.

    If things go too far -- plutocracy results, setting the stage for revolution at some point in the future.

    Perhaps a hard turn towards personal happiness by governments, NGO's and individuals, would be the best for our Western societies. It seems to be lacking at the moment.

    From my point of view, a much more robust set of checks and balances for governments and business, would accomplish much and complement efforts towards personal happiness and personal accountability.

    We are just a little of course for now. If we don't correct course now, eventually we will arrive at a point of no return.

    Let's hope that the measure of happiness can become an important part of the national commitment.

    Cheers, JBS

  11. CommentedHari Seshasayee

    Professor Skidelsky, it is hardly a new emphasis. It was put forth by Bhutan's king - in 1972 - long before I was born. It has been measured since by Bhutan, and continues to be measured; it can hardly be termed a passing fad or a mood that will pass. It is also not suggested as an alternative to GNP or GDP, but as an additional tool to measure a country's progress.

  12. Commentedjames durante

    I have been reading this pathetically, zealously pro-capitalist site for some time now, and this is one of the two or three good articles I have seen. So many mainstream economics writers forget that economics is a subset of politics. What type of economy you want depends on what you think an economy is supposed to achieve. This is a basic political question. GROWTH, GROWTH, GROWTH; FREE TRADE, DEREGULATION, LOWER TAXES, ENTREPENEURSHIP, FLEXIBILITY IN LABOR MARKETS; BLAH, BLAH, BLAH.

    The result of three decades of capitalist religion is a very unequal, largely poor, and quite unhappy Amerika. Those who work do so more productively and see an increasingly smaller share of the gains.

    Let's suppose that Aristotle is right, that happiness is a complete life. It is the end of all our activities and is self-sufficient. It depends upon having basic needs met, developing practical wisdom, and enjoying the leisure for friendship, family, higher culture, and philosophical reflection. Well, a ceaseless drive for more material wealth grants you none of the above and an increasingly oligarchical government that can focus only on even more unequal growth.

    Kaka-ville friends.

  13. CommentedProcyon Mukherjee

    Having witnessed the highest level of poverty in Western Odisha, in India (which has much lower per capita GDP than Somalia), I think the debate on happiness needs to shift to general well being of the people who deserve better as happiness is meaningless to people whose only access to running water is the river and devoid of any basic amenities that life offers them what usefulness does being unhappy bring to them? If happiness is measured in the delta change that life offers, in a situation where the delta is constantly missing, the depth of the depravity makes happiness seem an unknown word.

    Procyon Mukherjee

  14. CommentedZsolt Hermann

    The situation is more simple than we think.
    We forgot who we are. We are not some special aliens, disconnected from the rest of living creatures or the natural system we live in, but we are part of it.
    We still belong to the group of mammals, our body does not differ from other sophisticated mammals apart from small differences, our whole body and even the psyche is working based on the same laws and principles.
    And what we call "happiness" in biological terms is an overall balance, homeostasis within the actual ecosystem, and in our case this ecosystem exists within a human being, within human society and between human society and the rest of the vast natural system surrounding us.
    Happiness, the feeling of balance, the ease we can settle in life depends on how optimally we take part in the system with harmony.
    The constant quantitative growth lifestyle we stubbornly pressing despite it obviously collapsing is unnatural, it is going completely against all the natural laws around us.
    We behave like cancer within the natural system.
    Despite what the article claims that growth is bound to return, it is simply impossible, since the laws around us are bounding, they are unbreakable, and if the human species is planning to survive, carry on with the evolutionary process, we have to adapt to the system instead of trying to bend it to our own selfish and greedy desires.
    We do not stand a chance, as the awesome natural forces during natural catastrophes show us we are no match for them, nature around us will not change, only we can.

    1. CommentedEdward Ponderer

      Growth is indeed bound to return, but exactly that -- it is the boundary conditions that will determine it and these are beginning to form a steel wall of limits. Under those boundary conditions, the only way to grow will be inward -- and into each other.

      It is the new Humanity to born from this cocoon that will takes its rightful place in Nature as a new organic whole. This is the one that will know healthy growth. No ego cancers -- individual, oligarchical, or masses. Rather a unified whole that will work as one even with the environment itself.

      Nature repeats this scenario over and over again -- with species that make it. I like to think that we will yet truly prove the great success story of Nature...

  15. CommentedAndrew N Mason

    Why is it that people assume that because one person is at a higher position and makes a lot of money, then they cannot be replaced? Most likely, there is someone "within their 10 employees" (returning to G. A. Pakela's example) capable of taking over.

    Truth is that we are at an age in which fools can be kings. I can easily find a thousand recently graduated MBA's who would be better presidential candidates than Santorum or Cain were. These two were by many standard easily replaceable, yet they are wealthy and influential.

    And it applies to many more cases than just politics. What are the chances that no single person under a multinational company is better prepared and more intelligent than the CEO of the same company? On pure probability and objectively looking at the numbers (thousands of employees including PHD's), chances are slim.

    So if these millionaires don't have the power of scarcity to justify their positions and wages, then what is it?

  16. Commentedjack lasersohn

    Here is a thought experiment to test your hypothesis that only relative and not absolute levels of wealth matter. Would you prefer to live in the world of 1950 America or the world today? Yes we were much more equal but much poorer. Knowing that you gave up all that wealth, by returning to that poorer reality, would make you much less happy.
    The reason you have such weird results in studies on the this question is not because people actually have the perverse utility functions you posit ("I'd rather live to 50 instead of 80 so long as you die with me"), but because they lack key information.
    Asking a person from Bhutan with income of $5,000 per year if they are as happy as an American with $40,000 per year is not a test of relative happiness . It is a test of relative ignorance. If neither 'knows' about the life of the other, especially the Bhutan, it is not surprising that they will be 'happy' with their lot. They can't really imagine what they don't have.
    The fact that perceptions of happiness change so dramatically when you lift this veil of ignorance (pun intended) , as in unequal societies, is because people have much more knowledge of what they don't have and they want it.
    And, to be a bit cold blooded about it, their wanting it drives them to demand more and produce more, which occasionally leads to desirable things beyond Hermes and Bentleys like a cure of cancer.
    In this sense, reasonable inequality with the opportunity to move between classes is of enormous benefit to progress as a whole.

    1. CommentedMichael Zanette

      I don't believe people were fundamentally poorer because of increased equality in the 1950s. I also think it's somewhat of a false dichotomy to pit 1950s equality against today's wealth. The 1950s (the immediate post-war era) was one stage in the development of the "West". More so you cannot compare our advances in technology with what people had back in the first half of the 20th Century. We should be concerned with why we couldn't maintain said equality and still have sufficient economic growth.

    2. CommentedA. T.

      Inequality is fundamentally about knowledge thereof. We may all be dirt poor, primitive and ignorant relative to some pan-galactic super-civilisation, but this does not affect our happiness one whit. Instead, we evaluate ourselves relative to what we could realistically achieve. The unhappiness generated by inequality is in the gap between what we have and what we have seen others as having – social standing and power (which become major concerns once we are warm, safe, and fed) are zero sum. How much can you unilaterally influence my life or how much can I unilaterally influence yours.

  17. CommentedG. A. Pakela

    I submit that in your example of 10 people, 9 workers who earn $10 K and a manager who earns $150 K, the level of unhappiness would be greater if the business and the $150 K manager didn't exist, and the other 9 found themselves unemployed.

    Of course, you might point out that the 9 might be just as satified to be on the public dole, but the rest of the population that has to be taxed to support them is made unhappier than they would be if their tax rates were more reasonable!

    1. CommentedA. T.

      In comparing two situations, you cannot disappear some things but not associated others. If the manager were to disappear, would the business's productive assets disappear with him or would they be distributed to the other 9. If the latter, I strongly suspect that they would not be more unhappy (and form some business on their own). If the former, then it is the disappearance of assets that they previously knew were there that would be lamented.

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