Are we happier because we\’re richer? Wrong question

We are richer in 2012, but are we happier?
Swing skirts were in vogue, the Royals dominated the front pages, and Germany was shelling out lump sums to Europe in reparations. Was 1952 really that different to life today?

Umm, I believe that by 1952 Germany was having money shovelled at it under the Marshall Plan. But never mind. Here\’s the wrong question:

John Hawksworth, chief economist at PwC, said: \”After adjusting for inflation, and with the population only increasing by around a quarter, this implies that average incomes are more than three times as high in real terms. But whether this extra money has made people happier is harder to answer.\”

The actual evidence is that richer countries are happier, yes. The point about the Easterlin Paradox is that it is wrong. Of course, increasing incomes are subject to the law of diminishing returns so that each rise in income has less effect in making us happier but it is still there, that rise.

But that isn\’t really the point or the corret question. For it isn\’t the level of wealth that really produces the happiness. It\’s the increase in it itself. Living in a growing economy, one radually getting richer, increases happiness. We can see a brighter tomorrow, the kiddies are going to be alright etc. Living in a static or declining economy does not produce those jollies.

And, of course, the effect of an eonomy growing 2 or 3 % a year each year to keep those jollies coming is that over a generation or two that economy will double, triple, even quadruple in size.

But it\’s the growth itself, not the level, which has the greater effect upon happiness.

8 comments on “Are we happier because we\’re richer? Wrong question

  1. But then what do the lefties have left? They can no longer say “getting rich doesn’t actually make you any happier, so do yourself a favour and give me all your wealth”. Instead you can say right back “if getting richer doesn’t make you happier then feel free to stop getting richer yourself, but let me carry on”. Which would simply be far too liberal a thing to do – let those who want to get rich get rich (provided it’s not at anyone’s expense) and those who want to stay poor stay poor (again, provided it’s not at anyone’s expense).

  2. Of course the counterfactual is to look at the actual operation of policies which would produce zero economic growth.

    Generally massive repression, smashing of infrastructure and private capital goods and labour repression. Funsies!

  3. “Money doesn’t make you happy. I now have $50 million, but I was just as happy when I had $48 million.” – Arnold Schwarzenegger

  4. “it’s the growth itself, not the level, which has the greater effect upon happiness”: how do you know? Where did you buy your happiness-meter?

  5. In 1952 most people had little disposable income. Things like washing machines were a luxury – and there were no automatic ones – as were fridges, electric kettles, vacuum cleaners, carpets, soft furnishings.

    In the 50s people saved or took out credit to buy mundane items, many to make household chores easier for women who worked all day as well as doing the housework, or living a bit more comfortable.

    These things were, compared to today, very expensive as a proportion of incomes.

    I would say people who experienced those times would be happier today, with higher disposable income, mundane things easily affordable and more income available for leisure items and pursuits.

    I wonder what experience of life people have write these “reports” draw on to make their conclusions.

  6. ‘Horizon’, on BBC2 last night, demonstrated the the human brain is hard wired for optimism. In a shrinking economy those optimistic expectations are regularly frustrated, the result is that we feel cheated. An expanding economy reinforces our optimism, and allows us to think more kindly towards those not so well off.
    The program also demonstrated that we have brains much like a sea gull in that by flicking images past us at a speed that we think we cannot possibly ‘see’ what they are, the brain is able to interpret them and react in a way that computers can register and ‘interpret’ .
    Why sea gulls? Because I distinctly remember in the ‘Eagle’ an article about sea gulls being used to sort harvested peas before freezing. They were able, with a minimum of training (best not ask) to determine which of the peas pouring past them was not up to scratch, and be rewarded by being allowed to peck it up and eat it. I imagine the experiment was stopped when it was realized that what goes in must come out….
    Amazing what trivia is retained.

  7. The science is settled on this matter, people. The Intergovermental Panel on Happy Poor People has declared that there is a clear consensus on the matter and all that is needed now is a determined international effort to make everyone as poor as a church mouse. The IPHPP points to the ‘Hockey Stick’ graph which shows a clear uptick in happiness when people are forced to lick road clean wit’ tongue.

    The incontrevertible data comes from Brooke-Taylor et al (1967):

    THIRD YORKSHIREMAN:
    But you know, we were happy in those days, though we were poor.
    FIRST YORKSHIREMAN:
    Because we were poor. My old Dad used to say to me, “Money doesn’t buy you happiness, son”.
    FOURTH YORKSHIREMAN:
    Aye, ‘e was right.
    FIRST YORKSHIREMAN:
    Aye, ‘e was.
    FOURTH YORKSHIREMAN:
    I was happier then and I had nothin’.

    It is about time we started holding criminal trials for Happy Poor People deniers who constantly thwart government efforts to make everyone poor. As a firm believer in the Happy Poor People hypothesis, I naturally live in a $2 million house and fly business class while telling everyone else how much happier they’d be living in t’ shoebox in t’ middle o’ road and eating a handful of ‘ot gravel.

  8. The real management to happy poor people is to stop making them happy.
    Otherwise they won’t comsider going to a heaven as the bright future.
    Hence religion.

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