This is going to be one of those economics papers which will be waved in our faces:
Complex economic formulas developed by two professors of economics, Curtis Eaton and Mukesh Eswaran, and published in the current edition of the Economic Journal, suggest that greater affluence can seriously damage a nation\’s health. Based on their mathematical modelling, the economists advance the theory that once a country reaches a reasonable standard of living there is little further benefit to be had from increasing the wealth of its population. Indeed, it could make people feel worse off.
Veblen Goods….conspicuous consumption. Once we get to a certain level of wealth most extra spending goes on positional goods. So extra wealth doesn\’t make us happier.
Thus, and you can see the thus arriving, we shouldn\’t be trying for economic growth. We should do the equality bit, whatever the hit to growth, for that does make us happier.
Politically, this is the point (no, not the reason the research was done, rather, the use to which it will be put). The grand argument against some (most, all, to taste) redistribution effoprts is that there is an economic cost in the form of growth and wealth foregone. Deadweight costs of taxes and so on.
However, if we can say that a) that growth doesn\’t make us happier and b) that happier is the aim, then we can now ignore that lost growth and go for the equality….whatever the cost in lost wealth.
So you can see the political impact of such a paper.
However, there\’s two major problems with this view.
The first is that the Easterlin Paradox itself (the idea that happiness does not increase with wealth, once past a certain point) has been recently refuted. Richer people in richer countries are indeed happier.
The second is that few (I don\’t claim this as an original thought of my own but it is few who even consider it) consider the following point.
It\’s not the level of wealth that endows happiness…it\’s the increase in it that does. Growth of, say, 2% or 3% in average living standards (about right for capitalist economies over the past couple of hundred years) doesn\’t mean that tomorrow will be better than today. Variance around the trend is too high for that. But it does mean that next decade is going to be better than this, that the lives of our children will be better than ours, that our grandchildren will live in what would seem from our own childhoods to be the very lap of luxury. For growth of that sort of level means a doubling of living standards each generation or so.
This is something which causes happiness….and the absence of this \”things can only get better\” will, I submit, cause unhappiness.
All of which brings back into the argument the point that we cannot, whatever this new paper says, go for the equality at whatever cost to growth. For it\’s the existence of the growth itself which causes the happiness, not the level of wealth.