Two from Will Wilkinson
By Arnold Kling
He suggests that there are no limits to growth.
In a special issue of the American Economic Review about thirty years ago, some physical chemists wrote that once the energy problem is solved, nothing is scarce. If material X is in short supply, you can just make it out of something else. But the process of making more X may require energy. They expected that at some point we would solve the energy problem, in the sense of finding an inexpensive way to harness energy.
The logic of this is that when energy becomes inexpensive, materials will become inexpensive. Ray Kurzweil says that the material component of our GDP will asymptotically approach zero. As ideas get better, materials become less scarce. But when materials are not scarce, then it’s not clear what to charge for. Chris Anderson’s article on Free as a business model, which arguably just rediscovers what John Perry Barlow wrote fifteen years ago, seems relevant.
Next, Will reports on the research of Justin Wolfers and Betsey Stevenson on happiness inequality. As usual, I am unhappy with happiness research.
When people are asked “Are you happy?” they have to think in comparative terms (even Bruno Frey says this). X says he is happy because he looks at his situation compared with other people he knows (including himself in the past) and decides he is in relatively good shape.
Suppose that we start with a situation in which people of all different incomes interact regularly with one another. Happiness inequality will be high, because the poor people will be upset seeing all rich people, and the rich people will feel really good that they’re not poor.
Next, introduce segregation by income. Put rich people in enclaves and poor people in ghettos. Now, the rich people see mostly other rich people, and they don’t don’t feel quite so superior. By the same token, the poor people don’t see so many rich people, and compared to the people around them they don’t feel so bad. Congratulations–you’ve reduced happiness inequality. Are you proud of yourself? (I was going to say, are you happy?)
Think of measured happiness as a numerator in search of a denominator. Until you tell me what somebody is reporting their happiness is relative to, there is very little you can do with the data. It’s sort of like telling me that somebody’s income is 40 million kopeks a year, without telling me what the exchange rate is between kopeks and dollars or kopeks and goods.