Sunday, January 21, 2007

A Problem of Happiness

This one comes from something in the comment left by Sharon.
We’re seeing an increase in the focus of governments on happiness. The government of Bhutan has been using Gross National Happiness as it policy objective since the mid 1970’s. Even the stodgy British are getting into the act. The BBC series on happiness, the happiness formula, has an in depth look at happiness politically and otherwise. An increasing number of people are calling for the abandonment of traditional measures like Gross Domestic Product, and a focus instead on some sort of measure of happiness. To get a handle on this idea we need to take a look at the ideas behind GDP. We also need to have a serious look at happiness.

What is GDP anyway? Any first year economics text will tell you it’s the market value of all final goods and services produced in a geographic area during a given period of time. One of the things that almost always lost in talking to people about GDP is that it is a measure of size only. It doesn’t tell us about quality of life, it doesn’t tell us about all the important work that is done outside of formal labour markets, it doesn’t tell us about the state of the environment, or any number of other really important issues. So why do economists and others spend so much time talking about GDP?

There are a couple of really important answers to that question. First, it does capture something important, size. When we’re talking about an economy, size matters. I can think of very few people that would prefer to live in a country with a very small economy (per person). Second, GDP is conceptually easy to measure. One of the biggest problems in macroeconomics is aggregation. Any time you want to talk about an entire country you’re going to run into a problem of adding apples and oranges, and a lot worse. GDP provides a simple way to solve this problem, convert everything into dollars using market price and add. This is why so many important things are left out of GDP, like stay at home parents, as there is no market price with which to assign value.

Given the limitations of GDP, why not something like happiness? The first question is what is happiness? Happiness is really hard to define. If you’re going to focus a lot of your government policy on happiness it would be useful to have a working definition of what we’re aiming for.

Another key problem with happiness as an objective for policy is measuring it. If we’re going to focus policy on increasing the happiness of people, we need a way to tell if we’re doing it right. Without a measure, we could be making things worse and not know until the problem gets out of control. So how do you measure happiness? Typically, researchers just ask people a question like; “On a scale of 1 to 10, how happy are you?” The interesting thing about this is that self reported happiness seems to match what those close to you assess your happiness to be. So we can measure an individual’s happiness reasonably well. Now comes the hard part, aggregation. Remember we want to focus national policy on happiness. I don’t think it makes sense to do it one at a time. So we need a method to add up everybody’s happiness. This is going to cause problems. Using a simple average is going to be a real problem. If one person reports a happiness of 1 and another a happiness of 9, is that the same as two people reporting 5? Should we go eenie meenie minie mode?

Finally, we enter into the problem of what makes people happy. There are some common elements to studies of happiness. The first tends to be having good friends and strong family relationships. How can this be improved by government? Are we to have government mandated friendships? I can see the equivalent of the American Miranda warning: “You have the right to a friend, if you cannot make friends, one will be appointed to you.”

The pursuit of and progress toward a long term goal is another key factor. As you work toward a long term goal you get a sense of accomplishment that increases the level of happiness you report. What if your long term goal isn’t acceptable to the rest of society? How can government policy address this issue? Assign everyone a long term goal at birth?

A belief is something larger than one’s self is another factor that seems to play into reported happiness. I don’t see how anything other than enforced spirituality is going to be possible here. “You have the right a metaphysic, if you don’t have one, one will be provided for you.”

Richer does not seem to mean happier in many cases. One spin on this is that we adapt to pleasure and opportunities quickly. As our incomes or wealth increases we begin to see that standard of living as baseline rather than an improvement over how we had to live last year. This ties in to one of my beliefs about happiness. I think people are wired to receive happiness from the acquisition of things, rather than having them. It is the change in our environment that gives us joy or sadness. This is the origin of the idea of retail therapy, the rush of getting, not having. If we were to spend more of our wealth on experiences rather than things, we might be a little happier. Policy might be able to help in this regard.

Your relative place in society and peer group has a dramatic effect on happiness. If you’re doing “better” than those around you, you tend to report a higher level of happiness than if you’re doing worse. So equity seems like it might be a good idea. But it does bring up another problem. Does equity extend to what we do with our opportunities? People don’t appear to be good at making choices to improve their happiness. This may simply be that we aren’t very good at predicting what’s going to make us happy. If this is true and a psychologist, or heaven forbid an economist, has an idea should we turn over our lives to them and let them make the decisions for us?

Targeting happiness as a government’s objective brings up another frightening possibility. At what point should a pharmaceutical solution be considered. An increasing portion of the population is already medicated for a variety of “happiness” related issues. Should we all be?

Finally, what about changes that make some people better off and others worse off? Say you decide to take some money (being richer doesn’t make us happier, but poorer makes us grumpy) from one person and give it to a different person. How do we assess the net effect?

Basically, we all need to be concerned with happiness, but I don’t see any way to use it as an effective policy goal. We might do better to invest in a genuine progress index or improving GDP accounting to include some the important things that are currently left out.

Neat aside: poverty is almost always measured in terms of monetary income – not happiness.

A little bit of fun from Stuart.

1 comment:

Anonymous said...

Thomas Jefferson's "life, liberty, and the pursuit of happiness" makes a springboard for some interesting thinking.

First,it harks back to Adam Smith's "life, liberty, and the pursuit of property". In both cases, it's the pursuit that matters not the actual possession of either happiness or property.

Second, it is the third in a list of items apparently necessary to becoming a full human being. This means that life and liberty are two separate items and purusit of happiness is the third. Are they in priority order or just random. Does one need life first and if so, is that simply a beating heart? Is it a family with progeny? Is it a productivity with the acquistion of rewards and, therefore, wealth? Liberty, I suppose, could be quite simply the freedom to do what one wants. It could also be the freedom to live within a government system determined to be acceptable to the majority? Mmmm. Lots of questions here.

Now how about that all important "pursuit of happiness". Is it freedom from fear, famine, or sickness. Is it a comfort level when you don't have to look over your shoulder for the metaphorical saber-toothed tiger? Is it a path that includes creativity, innovation, and growth...and hence progress? Or does happiness and its pursuit preclude change?