There are some things some people so fervently want to believe that no amount of evidence or logic will persuade them otherwise, no matter how brilliant they are. Adair Turner’s book Economics After the Crisis is a good book, and I’m a great admirer of his. But my heart sank when I read this new review of it in the TLS by Robert Skidelsky. Lord S writes:
“The case against making increased GDP per capita the overriding policy objective is that it doesn’t deliver the increased happiness or welfare if promises. In 1974, the economist Richard Easterlin published a famous paper, “Does Economic Growth Improve the Human Lot?”. The answer, he concluded, after correlating per capita incomes and self-reported happiness levels across a number of countries is probably “no”. In a refinement dating from 1995, Easterlin found no relationship between income and happiness above an average per capita income level of between $15,000 and $20,000. Other findings confirm Easterlin. Data from the UK show that from 1973 to 2009, there was a continuous rise in GDP per head, but no increase in reported life-satisfaction.”
Er, no. The error of logic is that if you compare a stationary (reported life-satisfaction) and non-stationary (level of GDP) time series via a chart or regression, they will as a matter of construction not be correlated with each other. And the evidence has recently flowed in that GDP growth and reported happiness are positively and strongly correlated with each other – for example, Stevenson and Wolfers. Finally, common sense should tell everyone that abandoning economic growth as a policy objective is a political and practical no-hoper: we have that now and it’s called recession. It cements current inequalities, reduced job opportunities, and voters just hate it. So actually, the task of achieving satisfying and sustainable growth is a pretty difficult one (it’s why I wrote the Economics of Enough…).
Economics After the Crisis: Objectives and Means (Lionel Robbins Lectures)
Update: broken link replaced 5/11/14