It isn't often that I'm driven to shout at the radio in the mornings, but today was an exception. The Prime Minister is to announce today that the government will start collecting statistics on national well-being. There's one way to do this which is necessary and welcome; but the happiness gurus have latched onto the imbecilic way to approach it, and they were the people who grabbed the airwaves.
It ought to be obvious that measuring 'Gross National Happiness' is a bad idea simply from the fact that its advocates hold up Bhutan as a model. Bhutan? It's one of the poorest countries in the world, with low life expectancy, poor literacy levels and scant political freedom. I don't care how 'happy' its not-very-free people claim to be when they're asked in a survey.
Direct survey measures of happiness have grabbed attention because of the 'Easterlin Paradox': within any country, richer people claim to be happier than do poorer people, on a scale of 1 to 3 or 1 to 5. But the average level of happiness does not rise in proportion with GDP per capita after a level of around $17,000 a year has been reached, either comparing countries at any point in time, or in one country over time. This has been translated into the received wisdom that higher GDP doesn't make us happier. Our prominent advocate of this view is of course Professor Richard Layard, who was one of the first to write about the need for the government to force us all out of the rat race in his book Happiness.
But this supposed fact rests on a statistical error. Measured happiness can never go above 3 – and it's at about 2.6 now in the UK. That's because it comes from a survey – and anyway, happiness isn't a boundless concept: how could we go beyond euphoria? GDP is a statistical construction that can rise without limit (it's a non-stationary time series). To expect happiness to go up at the same pace as GDP is like expecting height to rise in line with economic growth. There is a link – people are taller in richer countries. But not 8 metres tall. A growing number of economists have pointed out this error – for example Helen Johns and Paul Ormerod in their book Happiness, Economics and Public Policy; and recently Betsey Stevenson and Justin Wolfers in a recent paper Economic Growth and Subjective Well-being. When you take the logarithm of GDP to deal correctly with the nature of the data, there's a strong positive link.
Having ranted about the imbecilic version of the happiness agenda, however, and insisted on the importance of continuing economic growth for our well-being (or why would be be bothered about a recession?), it is important to introduce new measures about the state of the economy. There are three kinds of statistics we need.
One is an array of indicators of what people tell the ONS matters to them, on the model of the dashboard of statistics published regularly in Measures of Australia's Progress. This approach is the one recommended recently by Amartya Sen and Joseph Stiglitz in a report for President Sarkozy.
A second is a measure of the nation's comprehensive wealth, including financial and infrastructure assets, and also natural assets and human capital. This is a huge exercise which economists including Ken Arrow and Partha Dasgupta have begun to calculate. Measuring a nation's assets, broadly defined, is an essential step towards taking proper account of the legacy we leave for future generations, and therefore for achieving sustainability meaningfully.
The third is a systematic set of generational accounts so we know what obligations past and present government decisions about pensions and welfare imply for future taxpayers. Without this, we'll never understand the sustainability of government finances and the structure of the state.
It's a huge agenda for statistical offices. Let's hope they're not diverted by nonsense about 'happiness'. For anyone interested in these issues, it's a theme of my forthcoming book, The Economics of Enough: How to Run the Economy as if the Future Matters (already available for pre-order from Amazon and elsewhere!)
Thanks for the common sense view on happiness. Any time a politician grabs onto an economic concept (Nudge, happiness &c) one gets suspicious – although why Cameron wants to do this now just as he is about to inflict misery on society is anyone's guess.
I agree that converting a subjective indicator into an objective index is misguided. I have a nice house and three kids so my happiness should always be around 2.5. The incipient government cuts make me angry but haven't affected me yet, so at what I point would I record my unhappiness? And how?
You talked about statistical agencies and indeed the UK's Office for National Statistics has started to grapple with this. They acknowledge a 'lack of coherence' and a need to see how to make all the constituent parts add up to a more coherent measure. Don't hold your breath.
You're always a ray of sunshine! The ONS can be relied on for common sense but I fear they don't have the resources or political clout to do all that's needed. The government's conversion to 'happiness' would be more credible if they also directed money to the necessary research and data gathering.
Well I can agree with the statistical argument about happiness 'by survey' not rising in line with GDP, but what about the fact that the US, still the wealthiest nation on earth by many measures, remains in many studies the unhappiest. If we ignore the Easterlin Paradox, there are still plenty of other indicators that living in a wealthy country makes for less happy people. The reason, I would suggest, is the widening gap between aspirational marketing dreams and the reality of peoples' lives, as argued very coherently by Oliver James in his book 'Britain on the Couch'. This is the REAL link between GDP and unhappiness – forget the survey.
The people of Bhutan, who have freer elections than many countries, but almost overwhelmingly voted to keep the monarchy, and who have more freedom than I believe your brief comments assert, are happy precisely because they are not ravaged by the incredibly manipulative and polished multi-channel marketing that is so keen to ensure our aspirations (and therefore 'growth') remain strong. Unfortunately, that leaves many concentrating more on what they 'have not' than what they have, and that makes us restless and unhappy.
The Stevenson and Wolfers paper suggests the issue in the US is inequality – it's worth a read, not too technical, and much more persuasive than 'The Spirit Level' about the adverse consequences of inequality.
It will take a lot to persuade me that Bhutan is a good model for my own society. The price of low growth is evident in health statistics etc in the Human Development Report.
A late comment here.
By chance I recently read Chapter 4 of your (Diane Coyle’s) revised edition of The Soulful Science on happiness economics. Reading it soon after hearing about Number 10’s happiness project left me laughing and groaning in equal measure.
Chris Dillow blogged on how practical results from happiness research could affect government policy ( here http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2010/11/happiness-policy.html ).
A suggestion.
Cut and paste Chapter 4 of The Soulful Science and Chris’s blog into a document.
Send to Number 10.
Get the government to release this as a public document.
Request a cut of the million pounds or so of public money that is being spent on this project.
Job done!
Modesty will prevent either Chris Dillow or myself from doing so, but someone else can save the taxpayer a bit of money – especially as Jonathan Haskel tells me the ONS now regards measurement of capital and labour services in the national accounts as 'non-core'