… and the Pursuit of Happiness - Institute of Economic Affairs

… and the pursuit of happiness
wellbeing and the size of government
interventions engage in wellbeing research and fail to find empirical
evidence in favour of such interventions, it seems safe to
conclude that more or larger government is not associated with
better wellbeing. As Ruud Veenhoven honestly concluded against
his own political preferences more than a decade ago, the characteristics
of welfare states neither create wellbeing, nor do they
make the distribution of such wellbeing more equal (Veenhoven,
2000). A further decade of research has confirmed this conclusion
despite popular claims that government interventions can and do
create happiness.
On the contrary, the large and growing literature finds either
no consequences of government policies or direct negative effects
of large government (cf. Bjørnskov et al., 2008a, 2008b). Yet
even if there are no direct effects, there is reason to worry that
increasing the size of the government sector and its active role
in society could cause losses of happiness in the long run. As
documented by Sacks, Stevenson and Wolfers in this volume,
economic growth leads to happiness in the long run. Likewise,
economic globalisation also tends to contribute to subjective wellbeing
(see Tsai, 2009). Activist government policies and a growing
public sector are likely to undermine both growth and globalisation
(e.g. Fölster and Henrekson, 2001; Bergh and Henrekson,
2011), and thus slow down what is already a slow trend towards
more wellbeing that may be difficult to track in rich countries.
As such, the apparently popular case for an active government
that creates happiness rests on very shaky foundations. Although
the UK and other countries have begun directing their statistical
agencies towards informing governments on what to do, the
evidence suggests that additional spending in the government
sector is at best likely to be pure waste, as evaluated by citizens’
happiness. Instead, when asking what government can do for you
in terms of happiness, the proper answer seems to be an echo of
Adam Smith’s famous 1755 lecture: ‘peace, easy taxes, and a tolerable
administration of justice; all the rest being brought about by
the natural course of things’ (cf. Frey and Stutzer, 2000; Bjørnskov
et al., 2010). In the present political circumstances, however,
there are few votes to be had from such promises. Policies actually
conducive to average happiness are neither sexy, nor likely to
attract more votes.
References
Bergh, A. and M. Henrekson (2011), ‘Government size and
growth: a survey and interpretation of the evidence’, Journal
of Economic Surveys, forthcoming.
Bjørnskov, C., A. Dreher and J. A. V. Fischer (2007), ‘The bigger
the better? Evidence of the effect of government size on life
satisfaction around the world’, Public Choice, 130: 267–92.
Bjørnskov, C., A. Dreher and J. A. V. Fischer (2008a), ‘Crosscountry
determinants of life satisfaction: exploring different
determinants across groups in society’, Social Choice and
Welfare, 30: 119–73.
Bjørnskov, C., A. Dreher and J. A. V. Fischer (2008b), ‘On
decentralization and life satisfaction’, Economics Letters, 99:
147–51.
Bjørnskov, C., A. Dreher and J. A. V. Fischer (2010), ‘Formal
institutions and subjective wellbeing: revisiting the crosscountry
evidence’, European Journal of Political Economy, 26:
419–30.
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