Oh no, not happiness again!

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

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8 thoughts on “Oh no, not happiness again!

  1. Saying that recession (and I don’t think this is what he means by no growth as it happens I think it is going to be a more nuanced point) equals unhappiness does not mean growth equals happiness, that is a big logical fallacy and it could be other factors (and that is what the article you link to seems to support the idea there is more to happiness than growth and it is more of a correlation) even if they stubbornly refused to admit it properly.

    It’s a similar concept to the fact that there is plenty of evidence that suggests income on a household level does not make one happier, it simply reduces unhappiness (up to a point).

    • I wasn’t claiming causality, which would be daft given that I’m denying the fashionable idea of negative causality. It isn’t sensible to build economic policy on the basis of subtle psychological states. Let philosophers and psychologists deal with happiness.

      As for economic policy, given the choice between GDP growth and GDP not growing – which we do actually call recession or depression – for me it is obvious that it has to be growth, albeit sustainable. ‘Growth’ doesn’t mean more handbags and bigger cars, it means innovation. If, in a land where the government was determined to attain zero growth, a new medicine treating Alzheimer’s were to be invented, and fifty new, brilliant novels written, the best play since Romeo and Juliet staged at the theatre, and a commercially viable photovoltaic cell brought into production, somebody would have to decide what to take away from those citizens who wanted to buy all the new products and services. Sure, measure GDP in better ways, measure the depletion of assets of all kinds – as I discuss in my book – but calling for growth to stop because it doesn’t make us happy is neither practical nor meaningful, in my view.

  2. It seems that the first part of your response, “… 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,” merely restates (confirms) the empirical claim that GDP has been going up for decades but “satisfaction” has been flat or fluctuating. How is that a rebuttal?

    It may be true that if you use the time differential of GDP then you see a correlation. But that doesn’t nullify any discovery about absolute GDP. It merely adds to our understanding: our happiness doesn’t depend on how rich we are, but does depend on how quickly we are getting richer.

    • But happiness *does* depend on how rich we are, in the way that height or life expectancy do – it just doesn’t go up in the same proportion. You could validly compare measured life satisfaction with log GDP or growth of GDP or any statistical transformation of GDP that turned it into a stationary time series. It is a flawed statistical inference to conclude that because measure happiness doesn’t rise in proportion with the level of GDP that the level of GDP has no bearing on well-being.

      • If someone was claiming that there is never a relationship under any circumstances (e.g. a starving person is just as happy as a non-starving person), you’d have a point. But Skidelsky specifically quotes the minimum threshold of per capita income as found by Easterlin. This clearly concedes that there may be a relationship at lower per capita incomes.

        Your last point is undeniable – it’s a myth that we can “control” growth either way. The great increases in GDP come from discovery of efficiencies. Supposing low growth becomes our policy in the future, how exactly are we going to stop people discovering efficiencies for themselves? Are governments going to lock people up as a punishment for not being inefficient enough? The very idea is crazy.

  3. How about we leave economics to philosophers and psychologists. If utility isn’t happiness, what the hell is it? Emotional wellbeing rises with log income, but there is no further progress beyond an annual income of circa $75,000.

  4. INET’s Rob Johnson actually makes the same mistake:
    http://ineteconomics.org/blog/inet/what-about-questions-economics-can-t-answer

    Take, for example, the so-called “Easterlin paradox,” which teaches that when a person’s income rises beyond what’s necessary to meet their basic needs it does not increase their happiness. This doesn’t match the standard capitalist economic assumption that rising personal wealth leads to increased individual fulfillment. Yet it’s been proven time and again. And economics ignores this. Our textbook models remain unchanged.

    I am really sympathetic with the gist of the article. Yet mistakes like that make it very easy for the mainstream to denounce the critics.

  5. Sorry, layout gone wrong – comment should read like that
    NET’s Rob Johnson actually makes the same mistake:
    http://ineteconomics.org/blog/inet/what-about-questions-economics-can-t-answer

    Take, for example, the so-called “Easterlin paradox,” which teaches that when a person’s income rises beyond what’s necessary to meet their basic needs it does not increase their happiness. This doesn’t match the standard capitalist economic assumption that rising personal wealth leads to increased individual fulfillment. Yet it’s been proven time and again. And economics ignores this. Our textbook models remain unchanged.

    I am really sympathetic with the gist of the article. Yet mistakes like that make it very easy for the mainstream to denounce the critics.

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