Happiness: the silver lining of economic stagnation? | Julian ...

http://www.theguardian.com/commentisfree/2013/nov/28/hap...

Happiness: the silver lining of economic

stagnation?
Julian Baggini
A study suggests that national wellbeing peaks at 22k average income. But that
doesn't mean there's no point in pushing for wealth
Thursday 28 November 2013 16.56GMT

It's time to rewrite the story of the nancial crisis. Far from being a disaster movie, it
was in fact a tale of salvation. As for the green shoots of recovery we are now seeing,
they are virulent weeds to be stamped out.
That would seem to be the conclusion to draw from a new study that suggests
ever-rising national wealth is the source of decreased life satisfaction. Looking at data
from around the world, Warwick University's Eugenio Proto and Aldo Rustichini of
University of Minnesota conclude that average wellbeing rises with average income
only up to around 22k per head per annum. After that, it slips back again. Britain is
more or less at that sweet spot, which suggests economic stagnation may be an
excellent way of avoiding the problems of poverty without acquiring the problems of
wealth.
You may well be sceptical. Even the authors acknowledge that many people "still
prefer to live in richer countries, even if this would result in a decreased level of life
satisfaction". In other words, people are overall more satised by less life satisfaction,
which suggests we should take the whole concept of "life satisfaction" with a pinch of
salt.
Any attempt to measure wellbeing in a robust way is fraught with problems. One of
the most obvious is that people naturally rank their contentment relative to what
appears to be a reasonable expectation, and that varies with time and place. That's
why, when oered to rank their life satisfaction a scale of one to 10, most choose
around seven or eight, irrespective of era or nation.
Even setting aside these doubts, there are more important reasons to be cautious
about how we interpret the data. What it does appear to show, and which almost all
studies support, is that having a low income is more of a problem that having a high
one is a benet. From a public policy point of view, that suggests the priority should
continue to be raising the life chances of the worst o, not those of the better o, or
even the "squeezed middle".

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Happiness: the silver lining of economic stagnation? | Julian ...

http://www.theguardian.com/commentisfree/2013/nov/28/hap...

If we achieved that, is it really the case that there would be no point in then
increasing wealth even more? Not so fast. We have to ask what explains the
levelling-o in perceived quality of life. Proto and Rustichini suggest that the key is
"higher GDP leads to higher aspirations driven by the existence of more
opportunities or by comparison with the Joneses". But this "sets up a race between
aspiration and realisation; when realisation is lower than aspiration, the
psychological cost paid is disappointment". Worse, this creates a feedback loop, as the
let-down further widens the aspiration-realisation gap.
What should be clear is that this is not an inevitable consequence of greater wealth.
Some individuals learn to treat their material comfort as a blessing and are not
concerned by the prospect that they could have yet more, or that others already do.
The materialist treadmill is not one we are obliged to get on once we reach a certain
level of income.
In short, the problem is explained by the familiar idea that money is not valuable in
itself, but only for what it can do. The failure of western societies to convert greater
wealth into greater wellbeing is in essence a failure to use our wealth wisely. This
should not surprise us. The majority of people alive today and throughout history
have not been accustomed to plenty. Humanity is on a steep learning curve and many
of the lessons we need to learn go against our natural tendency to acquire rst and
ask questions later.
That's why the debate about the relative merits of increased GDP and "gross domestic
happiness" are misguided. They are not mutually exclusive options. The optimal
strategy would be one in which we grew wealth but harnessed it better to enable
people to really ourish, rather than just have more stu. What we should be afraid of
is the pointless march of a narrow materialism, not the resumption of economic
growth in itself. A richer world in which the money was well spent is something with
which we should all be well satised.
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Topics
Happiness indices
Health & wellbeing
Economic growth (GDP)
Economics
Pay
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