… 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
a positional good which generates pollution according to Layard’s
logic. The question of what goods and activities count as pollution
generators must be addressed by policymakers who design
and implement policies based on happiness research. This means
that public choice economics – the application of the economic
approach to politics – comes to the forefront.
An array of public choice models indicate that politics
suffers from self-interested officials and bureaucrats, as well as
interest groups which attempt to influence and capture policy
for their own benefit at the expense of the broader population
(see Mitchell and Simmons, 2004). Policies, even if driven by
the best of intentions, cannot be designed in a vacuum. Instead,
policies are designed in a setting where a variety of self-interested
political agents are competing to design policies that satisfy their
own personal agendas. We need to ask ourselves what incentives
policymakers face when designing and implementing happiness
policies. What are the feedback mechanisms if mistakes are
made? What are the relevant interest groups attempting to influence
and capture policy? These are the types of questions which
public choice economics forces us to consider when considering
the realities of happiness policies. Unfortunately, issues of public
choice are rarely, if ever, discussed in the happiness literature.
This is surprising given the strong policy conclusions that many
happiness scholars proffer.
Finally, we must point out an irony in the policies offered by
happiness scholars. The political elites that control the design
and implementation of happiness policies are holders of highstatus
positions. Likewise, happiness scholars who offer advice
to governments on how to design and implement policies to
maximise happiness similarly hold positions of the highest status.
The status is derived from having the influence and power to tell
citizens what they can and cannot consume, and in what amounts,
in the name of maximising happiness. Surely political elites
and happiness scholars, given their concern for the happiness
of others, would support a large tax on their own incomes and
consumption to reduce the significant pollution they generate.
Negative unintended consequences
A major issue faced by policymakers is the knowledge problem.
As F. A. Hayek (1945) emphasised, the economic problem facing
society is not one of simply allocating given resources. Instead,
the key issue is how to best secure and utilise the unique knowledge
of ‘time and place’ that is dispersed throughout society. At
any point in time an individual can possess only a small piece of
the knowledge that is present in society. Hayek concluded that a
market economy, with an unhampered price system, was the best
means of coordinating economic activities. Given Hayek’s insight,
one realises that government interventions are based only on
the limited knowledge of policymakers. As a result, it is unclear
that specific policies can be designed that will have the desired
effect because interventions will generate negative unintended
consequences which policymakers, given their necessarily limited
knowledge, could not have possibly anticipated.
We noted above how a tax on a specific behaviour will reduce
the amount of the taxed behaviour. Kirzner (1979) highlights the
‘stifled discovery process’ whereby a government intervention
distorts or obscures alertness to existing or possible profit opportunities.
By raising the cost of productive entrepreneurial activities
to reduce ‘pollution’, happiness taxes also distort alertness to
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