IEA slams the politics and economics of happiness

The Institute of Economic Affairs (IEA) - the UK's oldest think-tank and a leading source of right-wing thinking in the UK - has published a new book harshly criticising prime minister David Cameron's initiative to measure national well-being. You can read it here. I haven't had time to read it myself yet, I'll try to do so over the weekend, but it looks juicy and thought-provoking. Have a look at the executive summary, below. It says:

• The idea put forward by the British government that economists and politicians pursue policies directed towards maximising GDP is a ‘straw man’. Government has always had a multitude of different objectives and government policy would be very different today if economic growth were the single priority. [This sounds fair enough.]

• Explicit attempts by government to control GDP, or rapidly increase GDP growth, have normally failed. Such a target- driven mentality is part of the conceit of central planning. Attempts to centrally direct policy towards improving general well-being will also fail. [One could still have centrally-planned initiatives to improve well-being, such as increasing the number of therapists out there, as this government has done. I'm just not sure such efforts will make much of a difference to 'national well-being' charts, which remain stubbornly flat.]

• Contrary to popular perception, new statistical work suggests that happiness is related to income. This relationship holds between countries, within countries and over time. The relationship is robust and also holds at higher levels of income as well as at lower levels of income. This calls into question the assertion that people are on a ‘hedonic treadmill’ that prevents them becoming happier as their income rises beyond a certain level of income. [Well, I'm sceptical of any arguments from national happiness measurements, but I'll have to look into this further.]

• This new work, using a data set of 126 countries, shows that the correlation between life satisfaction and the log of permanent income within a given country lies between 0.3 and 0.5. There is a similar correlation between growth in life satisfaction and growth in income.

• There is no evidence that equality is related to happiness. Indeed, the proponents of greater income equality admit that they are unable to cite such evidence and instead rely on very unsatisfactory forms of indirect inference. The clearest determinants of well-being would seem to be employment, marriage, religious belief and avoiding poverty. None of these is obviously correlated with income equality.

• The government is under pressure to bring in further legislation to promote ‘well-being at work’. This includes, for example, legislation on parental leave. The theoretical and empirical case for such legislation is weak. There is no relationship between objective measures of well-being at work and the extent of employment protection legislation, unionisation, and so on. Given the relationship between well-being and employment, any form of employment protection legislation that led to more temporary employment or reduced employment would be detrimental to well-being.

• A comparison across 74 countries finds that government final consumption negatively affects happiness levels and that the negative influence occurs regardless of how effective government bureaucracy is or how democratic the country is. Increasing government spending by about a third would cause a direct reduction in happiness of about 5 to 6 per cent. Centralising government decision-making is likely to lead to more intrusive government and lower wellbeing.

• If people wish to maximise their well-being and are the best judges of their own well-being they will take decisions about how to use their economic resources to pursue their own goals. We should allow people’s preferences for well-being to be revealed by their own actions rather than through surveys of what people say they prefer. [I guess, Cameron, Layard and other 'libertarian paternalists' like Matthew Taylor of the RSA would say that people are not the best judge of their own well-being, therefore they need scientific experts to guide or nudge them towards it.]

• Happiness measures are short-term, transient and shallow measures of people’s genuine well-being. [Fair enough - I agree. But the last several points have all been making moral and policy arguments based on happiness measurements. So are happiness measurements shallow and disregardable, or not?]

• Those who wish to use happiness economics in public policy have no effective way of determining whether an increase in well-being should be traded against justice, moral values or a decrease in freedom. It is a utilitarian philosophy which applies a principle that many might use in their own lives to the organisation of society as a whole. Applying such an overarching principle to the organisation of society as a whole is very dangerous.

I particularly agree with this last point. It's fine for an individual to choose to be a Utilitarian, but I find it incredible, bizarre and worrying that our government should have seen fit to sign the entire country up to Utilitarianism - without even asking our consent! Not even John Stuart Mill agreed with Benthamite Utilitarianism, and he was raised by Bentham. Yet somehow or other, we now live in an officially Utilitarian country with one scientific definition of well-being we all must fit into. And this David Cameron calls 'post-bureaucratic government'...