… and the Pursuit of Happiness - Institute of Economic Affairs

… and the pursuit of happiness
lessons the from unbearable austrian lightness and public of choice happiness economics policy
values are subjective, we cannot meaningfully compare them
across individuals or even across time for the same individual in
any objective way. As James Buchanan notes, ‘utility is a subjective
phenomenon, and it is not something that can be externally or
objectively measured’ (Buchanan, 1969: 9). Even though we may
be able to compare the relative incomes of two individuals, we
cannot say anything meaningful about their relative satisfaction
or the wellbeing that those individuals derive from that income.
Lionel Robbins made a similar point when he wrote, ‘There is no
means of testing the magnitude of A’s satisfaction as compared with
B’s … Introspection does not enable A to discover what is going on
in B’s mind, nor B to discover what is going on in A’s’ (Robbins,
1932: 124, emphasis in original).
While comparing happiness between people at a point in
time poses one set of problems, comparing happiness across
time poses a separate set of issues. While much of the happiness
economics literature focuses on framing issues – as evidenced
by the emphasis on the aforementioned ‘hedonic treadmill’
effect whereby those that are relatively wealthy expect more –
to explain differences in wellbeing, it neglects the fact that such
framing issues will cause individual respondents to have varying
understandings of what the notion of happiness entails. As the
circumstances change, so too does their very understanding of the
notion of happiness and wellbeing. Kling (2004) illustrates this
point when he notes that ‘People a few hundred years ago had
no idea what it was like to live with indoor plumbing, abundant
food, and antibiotics’. Of course, actual happiness survey data is
not available over hundreds of years, but Kling’s point with this
example is that as circumstances change, so too do notions of
happiness. How can we compare the happiness of respondents
in 1970 to those in 2011? Technological advances have changed
life on so many margins that it is unclear how we can be sure
that surveys are capturing the same concept of happiness across
time. And if they are not capturing the same notion of happiness,
how can we meaningfully compare survey responses across time
periods and conclude that happiness has changed or remained
constant?
Is there a fixed stock of status?
A core concept in happiness economics is the role of ‘status’,
which refers to one’s position relative to others. Just as relative
income matters for wellbeing, happiness scholars contend, so
too does relative status. Scholars point out that social status is a
‘positional good’ – a good whose value is a function of its desirability
in the eyes of others. Positional goods are zero-sum from
the standpoint that if one person possesses status, others cannot
also hold that same position. This matters for the study of happiness
because when one person obtains a certain status, it imposes
negative costs on others because they cannot obtain that same
status. Those with a relatively lower status are worse off compared
with those in higher-status positions.
This logic underpins many of the policy prescriptions
emerging from the happiness literature. For example, Frank
(1999) argues that individuals, in seeking relative status, place
too much focus on tangible goods (i.e. house size, cars, vacations,
etc.) while neglecting intangible goods (i.e. commuting
time, family time, etc.). It is the (over)emphasis on accumulating
tangible goods, while underemphasising the importance of intangible
goods, which leads to the underlying paradox. The main
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