Tuesday, July 31, 2007

Governments shouldn't worry about happiness

Helen Johns and Paul Ormerod from the Institute of Economic Affairs (a London-based free-market think tank) make an interesting contribution to the ongoing debate about the implications of happiness research for public policy. (Paper available at http://www.iea.org.uk/files/upld-book416pdf?.pdf).

Some commentators have suggested that governments should adopt the overall policy goal of maximising ‘gross national happiness’. Johns and Ormerod challenge that idea, showing that it would have some pretty perverse results.

One of the commonly cited findings of the happiness research is that increasing GDP has not led to higher levels of reported happiness. Johns and Ormerod show that not only is reported happiness not correlated with income; it is also not correlated with a range of other factors that would be expected to lead to increased happiness. For example, falling crime rates don’t increase happiness. Increased life expectancy doesn’t increase happiness. Rising income inequality doesn’t increase (or reduce) happiness. Increasing female earnings relative to male earnings doesn’t increase happiness. They also found that increased government spending doesn’t increase (or reduce) happiness (see figure to left, reproduced from Johns and Ormerod, p. 35).

Ultimately the reason that GDP, crime rates, female wages and government spending are not correlated with reported happiness is that in the surveys used to measure happiness, people are asked if they are ‘not happy’, ‘quite happy’ or ‘very happy’. You would expect that there would be a fair bit of stickiness in the results over time. Basing policy on such a poor-quality indicator would be a disastrous idea for all of us. Ultimately governments would find that they are pretty much powerless to increase happiness over its long-run average.

Rather than trying to pursue some indicator (like reported happiness, or Australia’s ‘ranking’ against other OECD countries), policy should be based on first principles. That is, governments should only intervene where there is a demonstrated market failure, and government intervention is reasonably expected to make things better.
As for happiness, rather than pursuing ‘gross national happiness’, I like the wording of the American Constitution, which enshrines people’s right to ‘life, liberty and the pursuit of happiness’. This recognises that not everybody is going to be happy all the time, but they should be allowed to do what they think will make them happy. Policy makers should never infringe on people’s right to pursue what they see as their own best interests, so long as they are not doing any harm to anybody else.

1 comment:

Unknown said...

Blog abandoned? I did enjoy your entries =/