Happiness pessimist, economic agnostic
By Scott Sumner
Bryan Caplan has a recent post on happiness and economic progress:
Seven years ago, my mentor Tyler Cowen did an interview with The Atlantic entitled, “Why I’m a Happiness Optimist but Economic Pessimist.” His point: Though GDP growth has been disappointingly low for decades, the internet does give us tons of free, fun stuff. The more I reflect on the Paasche price index, though, the more I’m convinced that Tyler’s picture is exactly upside-down. At least in the First World, the sensible position is economic optimism combined with happiness pessimism.
I’m with Bryan on happiness, although I can’t say I hold that belief with much conviction. I have absolutely no idea how happy I am (depends which day you ask me), so how could I possibly have an informed opinion on 7.3 billion people I’ve never met? All I know about other people is what I read in novels. And I don’t ever recall finishing a novel and thinking to myself, “that poor guy would have been happier if he’d been making $120,000/year rather than $80,000”. Their unhappiness comes from elsewhere. So call it a hunch—humans who already have the basic necessities to survive don’t get happier as they get richer.
On the other hand, I certainly do believe that richer people are happier than poorer people, on average. Just as I believe they are healthier, on average. I suspect that some mysterious third factor explains both income and happiness. This would explain why, on average, countries do not seem to be getting happier as they get richer, over the past decade. From The Economist:
I’m not at all confident that the happiness survey data is accurate, but we have nothing else to go on.
Actually, I’m surprised that the correlation between happiness and income is not more positive at the country level. While I don’t believe that higher income makes one happier, I do believe that the (free market) public policies that produce higher incomes make us happier. I’m far happier interacting with a private business than when I interact with a government bureaucrat, or an industry that exists due to regulation (i.e. health insurance.) At least private businesses have an incentive to make us happier in order to get repeat business. The DMV couldn’t care less whether or not I return to their office.
I’m an agnostic on economic growth because I don’t know how to measure it. Most stuff seems to be getting better over time, but how do we measure “better”? I suppose you could argue that growth is the extent to which new products like iPhones make us happier than old products such as party line telephones. (Millennials won’t remember those.) But even if new stuff makes us happier, when considered in isolation, it probably also generates the negative externality of making other stuff less enjoyable. If you are driving the equivalent of a 1965 Cadillac you probably feel miserable, as the car is a piece of junk. Everyone looks at you wondering why you are such a failure in life that you have to drive a car with a cheap plastic steering wheel, difficulty starting on cold mornings, and paint that rusts out after 5 years. But back in 1965 you felt great driving the same car.
Economic progress generates “better” stuff. While we can’t measure how much happier it makes us, it certainly has some value. But when you add in the negative externality of innovation making other stuff seem worse, it’s not clear that innovation has any net effect on happiness. I’m an agnostic on growth because I don’t know how to measure economic growth. The techniques we employ ignore the negative externalities from growth making the previous stuff seem worse than before. And yet, while we may not be growing we are certainly changing. We are good at inventing gadgets, but also good at inventing new ways to be unhappy.
When I take off my philosopher hat and put on my macroeconomist hat, I often insist that the economy has grown over time and that the living standard of average Americans is increasing. I am pushing back against the silly argument that millennials are worse off than their parents, in conventional terms. “The economy” is doing exactly what it’s supposed to be doing, generating higher living standards in the form of better stuff. If that’s not making us happier, that’s our problem. It’s not “the economy’s” problem. If happiness is not increasing over time it is because we are envious and insatiable. As the Chinese say, “Desire is a valley that can never be filled.”
PS. Now that I’m 63, I can look back on things that once seemed impressive but now are viewed as sort of lower class. Like 1200 square foot ranch houses: