Economics professor: We're no closer to happiness than we were in the 1950s

Lord Richard Layard is professor emeritus of economics at the London School of Economics. He was founder-director of its Centre for Economic Performance and now heads CEP’s Wellbeing Programme. His work on unemployment, childhood, mental health, and wellbeing has influenced policy in Britain and beyond.

Below are some of Layard’s remarks from a conversation included in the book Caring Economics.

How should society be organised so as to produce conditions for the greatest happiness of the population? This is the basic question that economic theory has been trying to answer for the last two hundred years.

Many economic theorists have suggested that we need competition to drive economic growth, and that economic growth will also bring growth in happiness.

We have experienced quite unparalleled increases in living standards and financial income, but this has not led to an increase in happiness. That’s the paradox I want to discuss.

Happiness chartCaring EconomicsFigure 8.1: Real income per head measures the quantity of goods and services produced per head of a population, as a percentage of its 1947 value.

Here are the basic facts. In the United States of America, we see a huge increase in living standards in the post- World War II period from 1945 to 2000. Yet the percentage of people who say they’re very happy is no higher than it was in the 1950s. The percentage of people who are not very happy is also the same.

Most individuals would like to be richer, and indeed what we find in a given society at a given point of time is that richer individuals are, on average, happier than poorer individuals. That may be a sad fact, but it is a fact.

The data in one particular year for the United States shows how the groups that have higher income do have higher average happiness, though of course it flattens off at the top.

An individual becomes happier as he becomes richer, but over time the whole country does not become happier as it becomes richer.

The explanation for this is that people compare themselves with other people. If somebody becomes richer, what is important to him is that he is becoming richer relative to all other people. This comparative wealth is important for the happiness of the individual.

Caring EconomicsCourtesy of PicadorThis story comes from ‘Caring Economics’ edited by Tania Singer and Matthieu Ricard.

But whenever someone’s level of relative income goes up, someone else’s has to go down. This is a very profound and important point, because it shows that the struggle to raise incomes is, to an important extent, fruitless.

It cannot produce higher happiness.

In technical language, we call this a zero-sum game.

The total that can be achieved is fixed; all that can happen is that we rearrange who gets what from this total. To raise incomes is therefore not a meaningful overall goal for a society.

Excerpted from Caring Economics: Conversations on Altruism and Compassion, Between Scientists, Economists, and the Dalai Lama edited by Tania Singer and Matthieu Ricard, copyright © 2015 by Tania Singer and Matthieu Ricard. Published in April 2015 by Picador USA. All rights reserved.

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