Happiness and Economic Growth

international | miscellaneous | opinion/analysis Friday April 16, 2004 13:59 by Rather onlyhotrocks at hotmail dot com

Basically this is just some economic research I was working on. Quite simply, it investigates the relationship between individual and national wealth, various economic circumstances and peoples own characteristecs with personal subjective well-being. Criticise, analyse, disagree or expand on. I never quite finished it so I believe there is much work to be done in the the area on cultural differences and the notion of individual sovereignty. You all probably already know all this stuff but a mate told me it was good so thats why I'm posting it up. And I'm bored. Sorry if its a bit long

Modern post-industrial society represents an opportunity to humankind that not so long ago would have been impossible to imagine. Technological advance has resulted in material abundance. Our relationship with nature is no longer the physical strain it once was. Our life expectancy has risen dramatically. And yet, one can’t help but feel that there is something missing in this whole process; an indescribable feature that is not contingent to humanity but fundamental to how we define ourselves. I am not certain what this “something” is but what I do know is that I myself strive to be happy. I strive for all those around me to be happy. I want the world to be a happy place. This may sound simple, even stupid but this is the perspective in which I view the world and as a consequence, economics. Through studying economics we find a deep rich history that partly describes the developments of the human race. We find it to be the facilitator of the process of change and a driving force of modernization. It predicts and it describes. However, in its attempts to measure this whole development I have always wondered, is the discipline also somewhat misguided in much the same way as the whole capitalist culture it describes? Particularly, I have always wondered why there is so much emphasis on economic growth, the proliferation of goods and services, when they are in relative abundance and when many of them are of questionable nature, either morally or in there practical use. Would it not be more rational and wise to concentrate on obliterating misery and maximizing happiness? Are we actually doing this? Can we do this? Have we even done it? The fact that I am writing this now is enough proof for me to assume we have not and the rest of this paper will be devoted to finding out why this is. I have chosen happiness as the focal point of my study for its accessibility and because I believe it is an important abstract term unique to every living entity.

The following essay will be divided into four major parts. The first of which will deal with introducing the concepts of happiness and economic growth. In presenting the reader with ‘happiness’, I shall provide a brief outline of its determinants and the psychological processes behind the notion. I will then introduce national income accounting and reveal some of the discrepancies within the theory that are important to realize prior to the investigation. In the second section, I will delve into the relationship between welfare and the economy. In particular, I will look at the trends that exist between subjective well-being and (i) growth over time, (ii) different countries at different stages of development, (iii) different income groups within the same society, (iv) employment status and (v) inflation and the business cycle. Section three will consider the social side of the happiness and growth relationship. I will look at the facts from the previous section and see how they are associated causation, morality and social problems and propose that some large changes are needed in economic and political policy if we want to make society happier. The final section shall be a conclusion. Throughout the study, in all sections, I shall expand on concepts, see how the study relates to other issues and try to make some policy proposals.
I

Happiness could be argued to be the ultimate goal of humanity. There are many other pursuits in life such as justice, freedom, duty or love that could merit such a description but ultimately these other goals, in some way or form can be reduced to preference satisfaction and the pursuit of happiness. So what factors determine happiness? Bruno S. Frey and Alois Stutzer (2002) distinguish five main types. Firstly, they acknowledge personality factors such as self-esteem and optimism. Secondly, they recognize Socio-demographic factors such as age, gender and education. Thirdly, they identify Economic factors such as income, employment and inflation. Fourthly, Contextual and Situational factors such as working conditions, health and interpersonal relationships with others are considered determinants of happiness. And finally, Institutional factors such as direct political participation and decentralization are viewed as important.
As is clear from this Economic factors are only one determinant of happiness among five. Therefore, it is important to recognize at this early stage that economic growth does always entail growth in happiness. The rational economic man we always read about in books whereby growth leads to increases in income which then leads to increased preference satisfaction based on the principle that one can satisfy one’s own desires more satisfactorily when one has greater choice and a greater income, thus raising the overall utility of our ideal human, actually does not occur. The process is much more complex and depends on the above factors. As Tibor Scitovsky points out in his book, “ The Joyless Economy” many factors that give us the greatest satisfaction are the most basic ones such as self-sufficiency or “from personal contact with others and from the use, consumption or contemplation of goods and services to whose production others have contributed.” (1976, p.81) The point is much of this satisfaction is outside the realm of economics. Basically when we construct national GDP or any other variation we are only dealing with preference satisfaction (which some even argue is distorted by institutions) in the market place. What is important about economic factors is that they facilitate and provide the basis for the fulfilment of all other happiness factors. They assist in the achievement of good health care, good education and the availability of choice in how we wish to live our lives. “It is hard to play tennis without a court, or bridge without a card table, and even conversation is more enjoyable over a drink.” (Scitovsky, 1976, p.84) Happiness is dependent upon material considerations.
Due to this knowledge, I shall not be studying happiness from a solely economic perspective but shall draw on psychological research as to how we achieve the state of being happy and in doing so I will rely on studies based upon subjective well-being (i.e. individual evaluations of ones own state of mind regarding happiness.) Happiness is an emotion and the way we evaluate such an emotion is based upon intensity and comparisons with past experiences. Frey and Stutzer (2002, p.12) identify four major processes in this activity: (i) Adaptation, whereby initial increase in happiness is soon adjusted to and then assumes a position converging on the initial level. This is recognized as important because as we shall see rapid economic growth can result in increased material comforts initially which raise happiness but in time begin to decline and ultimately come to a rest close to the initial level (ii) Aspiration, whereby happiness is attained due to satisfying hopes and expectations. This process has both positive and negative effects on happiness. (iii) Social Comparison, which represents the idea that there are no absolute standards of happiness but that happiness is relative unto whom one compares oneself and the environment in which one lives and (iv) Coping, that factor which is capacity to overcome misfortune. It is from this framework that it is essential to study happiness. Also, throughout this study causation is always a factor one must keep in mind. For example, am I happy because I am rich or am I rich because I am a happy person who people find easy to get along with and as such have been rewarded in this manner? As was mentioned previously, happiness is an abstract concept and is thus open to much interpretation.
Also, in dealing with the relationship between the state of the economy and happiness it really is worth stressing how little GDP actually represents happiness and how much excessive emphasis the business and political world put on it. To begin with, if what people want is to be happy then the welfare measures from non-market activity must be considered. This is no mere passing thought either. As Frey and Stutzer (2002, p.38) point out, self-sufficient household production accounts for about one third to a half of the measured national income. Also, the welfare effects of leisure are such that they account for approximately a figure the same size as GDP. Thus the omission of these factors radically diminishes and changes the appearance of how one maximizes individual well-being. Exclusion of environmental degradation and the concept of sustainability serve to increase the welfare of society when such considerations as pollution and asset depletion, a direct consequence of economic activity greatly diminish welfare and happiness. A similar logic is applicable to the social costs of crime. The absence of considerations of the relevance of income distribution (which is revealed through utility being calculated “at the margin, an increment of income will be valued the same by all people. Within a country where there are disparities of income, this is unlikely to be true.” (Kenny, 1999, p.5- 6), and the existence of the underground economy (which was between 13-23% of GDP in the time period 1990-1993 in Ireland) to happiness, although representing difficulties in calculating such factors does suggest, and when combined with the other factors, seems to reinforce that national income accounting is being abused to strengthen present structures of domination and control society as a whole. As Scitovsky noted, “the performance of the economy cannot be judged by the size, growth and distribution of the national product alone. As important, or perhaps more important, is the economy’s ability to produce the economic product with a maximum of beneficial and minimum of harmful accompanying side effects.” (1976, p.105) This once again shall be a topic to which I will return throughout this study, as it is important to realize that it is only over the market economy on to which we can exert direct control but through it, we can enhance indirect positive externalities for non- market realms.

II

Now in beginning such a study it is probably best to begin by investigating the performance of a single economy over a period of time and then compare these findings with the relevant statistics available on subjective well-being. Japan a country whose per capita income rose six-fold in the period 1958-1991 saw almost no change in life satisfaction over the same period (Frey and Stutzer, 2002, p.8). This suggests that there is no correlation between growth and happiness. However when we consider the already mentioned psychological factors we discover a more complicated situation. Once we apply the Adaptation and Aspiration principle we see that although such growth in GDP per capita has probably increased overall welfare, over the same period of time expectations about what constitutes a suitable standard of living have also risen. What one wants or expects to achieve has also changed. Aspiration Theory claims that happiness is determined by the size of the gap between aspirations and achievement. The smaller the gap, the happier the person is. An increase in income results in increased opportunities and thus, higher aspirations. This is an ongoing process and as such the satisfaction of wants can be insatiable. However, it would be hard to ignore the fact that Japan in this period progressed from being a defeated power after World War II ruled by a dictatorship to become an affluent country at the cutting edge of technological change to which the positive externalities must have been immense and to which the population attached much pride and prestige. I am not saying that life was objectively better in Japan at the end of this period compared to the beginning, for one there may have been drastic developments in the alienation of the population but what I am suggesting is that it would be quite difficult to believe that it wasn’t.
Following on from this intriguing experience in Japan I believe it is essential to look at the work of Easterlin. In his research he believes he has found that by raising the incomes of all as GNP is supposed to do, this will not increase the happiness or subjective well-being of all because “the material norms on which judgements of well-being are based increase in the same proportion as the actual income of the society.”(1995, p.35) Absolute income is irrelevant in the view of Easterlin and it is relative income which is important and when this is combined with the aspiration factor and modified for the existence of present habits and ways of life, increasing the standard of living does not increase overall subjective well-being. He cites the evidence from Japan and also from the USA, where the data dating from the post-war period to the early seventies and General Social Survey data from 1972- 1991 indicate the percentage of those ‘very happy’ remained more or less the same aside from a peak in the late 1950’s during this period (1995, p.37- 8). He also states that the position of Japan in 1958 is similar (or even worse) to the position of many presently developing countries and as such one “would suspect that the spread of consumer durables among the Japanese must have involved widespread satisfaction of perceived needs.” Since this does not occur it does have serious implications for current developmental policy.
The work of Oswald finds a slightly different answer to that of Easterlin. In his statistics on the USA taken from the GSS for the years 1972- 1990, he finds that happiness is increasing but only very slightly. “ The raw data are consistent with the view that the category ‘pretty happy’ is expanding while ‘not too happy’ is shrinking.” However when this is juxtaposed beside the enormous growth experienced by America in this period (average income increased by approximately a third) “it seems extra income is not contributing dramatically to the quality of people’s lives.” (Oswald, 1997, p.1818) Therefore, Easterlin’s predictions are falsified but only just and therefore do still remain very relevant.
In investigating this correlation between income growth and life satisfaction it might now be appropriate to look at the relationship between income levels and stages of development with subjective happiness across a number of different countries. (Frey and Stutzer, 2002, p.9) This study was carried out in the 1990’s in 51 countries over a sample of above 80,000 people. The results showed a moderate positive relationship between happiness and average real income. It does suggest that rich countries are indeed happier than poor countries and there are no rich countries, which could classify as having a happiness level that is on average low. On closer inspection though there is an interesting trend (or lack of it) that is present when we compare the life satisfaction levels between higher income level countries. What becomes apparent is that countries, in having higher levels of income, do not necessarily translate these superior income levels into greater life satisfaction. Indeed, there seems to be a presence of what economists might term diminishing marginal utility of income which combined with psychological processes creates a process that suggests once basic human needs are met the continued desire for income growth may not be as dominant as it is assumed. There may be a curvilinear relationship between happiness and growth in income.
Another similar conclusion is found in the work of Charles Kenny. Using data from Veenhoven for statistics on subjective well-being and the Penn World Tables for information on income per capita he discovered a most compelling finding (1999, p.12). He discovered that the 1990 data did indeed show a positive income-happiness relationship. However when he split the data “into two groups of income above and below $8,000, there is no significant relationship between happiness and income above or below this line.”(1999, p.12) This suggests that there is a threshold whereby once all basic human needs are met income is longer fundamental to the well-being of individuals. It may be other factors such as the desire for democracy, human rights and equity that become much more relevant to the general population. As well as this, it is worth noting that in both studies above some poor countries do have very high life satisfaction levels that must be dependent on particular societal and cultural factors. At present in order to achieve higher levels of income it is necessary to rid oneself of such positive characteristics so as to homogenise with the global economy. In other words, a trade-off must be made between sources of satisfaction. Is it commodities or is it community? Kenny cites the idea of McMylor when he says, “raising the income of all requires a process of social, political and cultural modernization, it may also be that many in society find this process more painful than the palliative effects of increased wealth…if growth changes values, altering indifference curves, it is impossible to say a priori if we will be happier before or after growth.” (1999, p.5) However in these ‘developing’ countries they may not actually attach such virtuous credentials to these characteristics as do people in the 1st world- “The notion that people in poor countries are happier because they live under more ‘natural’ and less stressful conditions can be considered a myth.”(Frey and Stutzer, 2002, p.76)

The influence of globalisation is also present in the work of Easterlin when he theorises international comparisons about subjective welfare. He states that, “ the expected happiness-income relation in international cross-sections would depend on the extent to which trans-national material norms have come to prevail throughout the world.” (1995, p.42) This means the more people in the world who receive satisfaction from the same things will result in a world where ones happiness (or any nations) will depend on their relative position to the global material norm. The variations will be a direct result of ones position and not due to other social or cultural factors. As just mentioned above “even in poor countries there is evidence to suggest that happiness is related to other things apart from income and its effects on the standard of living… people in poorer countries often have different, more achievable wants.” (Kenny, 1999, p.17) But with the onslaught of development to which it is strongly argued material aspirations vary positively with, and with the homogenisation of preferences people may find it more difficult to satisfy their desires through diverse methods without exclusion from society. However, such doomsday prophecies must be considered with care, although they are worth taking note of because they are indeed a possibility.
The next logical step it seems now is to look at the relationship between income and happiness within the same country in a particular time period among different income groups. Consider the example presented by Frey and Stutzer (2002, p.82-83) based upon data collected in the United States in 1994. In this study we see a clear positive correlation between income and happiness. “The proportion of persons rating themselves to be “very happy” rises from 16 percent for those with incomes below $10,000 to 44 percent for those with incomes above $75,000.” (Frey and Stutzer, 2002, p.82) Thus now we find that even though people living in the US are wealthier than those in the 3rd world this attribute does not unconditionally imply higher levels of life satisfaction. The reason why this occurs could be assigned to the psychological feature of Social Comparison. This declares that people judge their own happiness not due to absolute levels of income but in relative terms. As we have seen previously this is a common trend in the link between happiness and wealth. As Easterlin suggests if every single persons income were to increase this would not increase on average everybody’s happiness “because, in comparison to others, income has not improved.” (Frey and Stutzer, 2002, p.85).
Happiness is then a matter of status. It is a feeling built on belonging to and being appreciated by your peers. This involves conforming to particular social norms and practises. This could involve actions such those of wearing clothes or having a home or other daily activities which we take for granted. However, this matter of status can be extended to include “rank within society”. (Scitovsky, 1976, p.118) This is the desire to be distinguished from others in society in that one is better than others. A very common method of such status satisfaction is achieved through income and as such capitalist economic relations facilitate this. It is here that we find one of the paradoxes of this system of relations because to achieve happiness by this token “one person’s gain in status is automatically matched by an equal loss of status suffered by those he outranks…which changes only the distribution of status satisfaction but leaves unchanged the sum total of such satisfactions if we attach equal weight to the satisfaction different people get from their ranking in society.” (Scitovsky, 1976, p.119) It is then my intuition from this that capitalism and its continued growth which is measured in terms of GDP and GNP represents a very inefficient method of raising the general welfare of the planet. The competition it promotes does accelerate change but not the proliferation of happiness, and as such the technological advances are used in wasteful ways. One such method is that of conspicuous consumption first identified by the great economist Thorstein Veblen whereby in order to portray wealth individuals engage in a sort of practise similar to advertising their affluence “by largesse in spending… and by buying conspicuous objects because of their high cost rather then in spite of it.” (Scitovsky, 1976, p.120) Thus, much of what is termed growth in modern ‘developed’ society is actually detrimental to the pursuit of happiness.
Another important factor to consider from an economist point of view when tackling this problem of life satisfaction is its affinity with employment and work. This is firstly relevant because it is in the market economy whereby most people make a living and in general, the more people that are employed the greater economic growth will be. Secondly, and more importantly being employed is a determinant of how happy people feel. In a study of employment status and satisfaction in Switzerland between 1992 and 1994 (Frey and Stutzer, 2002, p.98-99) the chances of an unemployed person saying that they are ‘completely satisfied’ with their life is 20.6 percent lower than that of getting the same response from an employed person. In another separate study carried out by Di Tella, MacCulloch and Oswald on Eurobarometer statistics from 1975-1991 it was discovered that for “every country in Europe, being unemployed increases the chance that the respondent declares himself dissatisfied with life, even after holding other things constant that may be expected to be associated with unemployment… this evidence is consistent with the commonsense idea that unemployment is a major economic source of human distress.”(1997, p.7- 8) Oswald did a prominent study that further corroborated the link between unemployment and unhappiness. He studied the General Health Questionnaires in Britain in 1991 for signs of depression and he found “that income has no strong role to play but joblessness does… Mental distress is twice as high among the unemployed as among those who have work.” (1997, p.1821)
In particular, this final example illuminates the non-monetary factors of being unemployed. In a study done in America “calculation suggests that to ‘compensate’ men exactly for unemployment would take a rise in income of ~ $60,000 per annum” (Blanchflower and Oswald, 2002, p.15). Due to the large amount of money needed to compensate unemployment it once again reiterates the point that additional money is of low benefit when it comes to the well-being of an individual and as such highlights the inadequacy of welfare benefits for some people. This is due as Frey and Stutzer correctly point out due to the psychic cost of being unemployed (e.g. depression, anxiety and low self-esteem) and the social cost whereby it is stigmatised. Also, unemployment in general is a monetary drain on societies resources as welfare payments must be paid and is the source of much criminal activity as individuals must engage in it to make ends meat. Essential to this whole problem of unemployment is an individuals reference group. If one is part of a group, social circle or community consisting of many unemployed individuals one may not be stigmatised to such an extreme as a person who is in the opposite situation and thus not experience the same mental strain of being workless and be quite content with the entire situation.
However it is not merely the condition of being employed that helps determine happiness but also the type of work performed. “Work can be pleasant or unpleasant, and its pleasures, comforts, and discomforts play an important role in our lives.” (Scitovsky, 1976, p.90) The way in which work is stimulating is due to two factors. The first is that of the intrinsic features in work such as the control one has over the job or how much it challenges the individual’s skills. The second type of factor that determines the desirability of work is that of its extrinsic features. These include working conditions, pay and job security. If both these features are viewed as preferable to the individual then he will work hard, like his job and should be very happy. However this is not always the case. Due to modernization and the division of labour and specialization that resulted from and indeed caused the increase in the production of goods and services the worker often found himself, to use a Marxist term, ‘alienated’ from his work. Due to lack of control over the work process and lack of utilization of ones skills, the worker used work not as means of defining oneself as had previously pre-industrial revolution been the case but began to perceive work as basically a means of survival; an activity that must be endured so that the individual can survive and be their actual selves in their leisure time. Nowadays most work is of this nature. It is monotonous and the worker receives little benefits from it except wages. However, “ the unpleasantness of work is much easier and less costly to remedy when it stems from insufficient challenge and stimulation than when it is caused by exhaustion due to excessive stimulation” (Scitovsky, 1976, p.92) as was the case before modernization.
The contemporary economist only seems to add to this problem and would be accused by Marx of ‘commodity fetishism’, the habit of focusing attention on the end product rather than the process of creating the product. No more is this more illuminated than in national income accounting whereby finished products are used to measure the wealth and welfare of the population. There is no consideration for the joy, welfare, happiness created (or not created in this instance) in the work process. Indeed the facts show this. “In Britain and America the level of job satisfaction is not rising over time.” (Oswald, 1997, p.1827) However, work still can be a source of satisfaction. The existence of volunteer work is a testimony to this.
Another related economic determinant of happiness is that of inflation. To compare inflation rates with happiness data they are both collected independently and then cross-examined. Just like unemployment, inflation has a negative impact on welfare because it increases the cost of living. However what is of particular interest is the relationship between subjective well-being and the traditional unemployment-inflation trade-off. Di Tella et al. have also done much work in this area. They assume that life satisfaction is a function of the unemployment rate and the inflation rate (both negatively related to income), income per capita (a weak positive relationship) and unemployment benefits (positive relationship). Therefore under these conditions happiness is “a decreasing function of the inflation rate and the unemployment rate.” (1997, p.2) This is the so-called ‘Misery Index’, which is simply the addition of the two negatively related happiness factors (although the effect of unemployment is underestimated as it does not include the direct consequences of unemployment.) The higher the unemployment and inflation rates the lower the life satisfaction is. In a study they carried out on a panel of eleven European countries from 1975-1991 they found that “a country that wishes to eradicate an inflation rate of 10% per annum is ready to bear a 9 percentage point higher unemployment rate.” (1997, p.12) This result not only highlights that inflation has a strong negative effect on happiness but also that “people are willing to undergo a considerable increase in unemployment to get rid of price increases” (1997, p.12- 13). However, this calculation does not fully emphasise the importance of employment.
Even so, what this study serves to highlight best is that happiness is based partly on life satisfaction cycles derived in part from the economic cycles of booms and busts. As such objective macroeconomic events do have an impact on a peoples’ happiness. To take the other extreme to happiness, that of extreme depression and suicide Oswald found that, “In 1911, 2,600 men committed suicide in England and Wales. In 1990, 2,800 did so. The population over that period nearly doubled.” (1997, p.1824) In this time period economic growth and the positive effects of it in Britain would have been immense such that this material shows there is a negative relationship between growth and suicide. This is supported by evidence from the USA whereby “total suicide deaths reached their maximum in the Great Depression”(Oswald, 1997, p.1824). Our conclusion, the government should pursue growth-orientated policies. But, we have just seen in modernized countries at present increasing GDP per capita is only increasing happiness at a very slow rate. Perhaps then, it is the other positive effects of growth such as employment that are most beneficial. We should be tackling the problem of unemployment as it “appears to be the primary source of happiness. If so, economic growth should not be a government’s primary concern.” (Oswald, 1997, p.1828) Of course this will lead to the inflation problems and therefore the problem is not as clear-cut as I have just stated. However, it is worth noting as well that due to the nature of the business cycle there will always be recessions and always periods of unhappiness due to objective economic conditions. This correlation between growth and happiness then casts doubts over the validity of the capitalist system. Maybe if we changed the rules and morals of the economic world we could combat inflation and unemployment and decrease the chances of periods of unhappiness.



III

Now what becomes apparent is that it is not just that the growth in the wealth of modern society does not always increase happiness but that in recent times it has not achieved it that often, - “there is no particular reason to think that growth is always good. Growth in wealthy countries fails to create what it is supposed to create: greater utility.”(Kenny, 1999, p.21) Indeed it could be that what needs to be expanded is not our choice of consumption but the freedom of choice on how we each individually and collectively want to live our lives. In other words, there is a need to correct the imbalances in our society and the global economy as a whole. Redistribution of income would lead to the alleviation of suffering and the liberation of the many imprisoned in the poverty trap and the third world. This in turn could create new and promising opportunities for the development of humankind. What is being suggested is that if we act according to our morals we can enhance social interaction and create a happier society, which then can grow in a more equitable and efficient way- “The link between general happiness and a co-operative society provides the basis for asserting that happiness might, in fact, cause growth.”(1999, p.9) This is the question of causation once again. We have seen that economic growth does indeed correlate to advances in welfare. However, the above explanation is also equally applicable in my eyes for explaining some of the past escalations in well-being (indeed probably the first advances) and the logic could be used for promoting future such events. It could well be a two- way relationship with causation running in both directions.
Then what needs to be rediscovered are the intangible assets on this planet. Trust, sympathy, justice, duty, companionship and other such values such that freedom can be enhanced and happiness can flow from such developments. Some of these values are already present such as the work ethic. Most people work hard now and we must work hard for change. This is what some may call idealism and in many ways they are right. It is an ideal; an ideal to be worked towards but which also has pragmatic repercussions. For a start, Deiner and Suh cite Ingleharts hypothesis, “that a widespread feeling of well-being is necessary for democracy to prosper.” (1997, p.18) This implies that in order to create a democracy we must act democratically toward one another. We must internalise the above virtues. One step would be to increase political participation and to decentralize power. Another pragmatic consequence would be to increase our efforts in the fight against inequality. Kenny (1999, p.19) cites evidence from nine countries across Europe linking income inequality and happiness. In it the so-called Gini coefficient represents inequality and as such an increase in this Gini coefficient represents an increase in inequality. What the results show are that decreases in inequality in society serve to raise to the subjective well-being of society- “six countries confirm a negative relationship between inequality and happiness, and three contradict it. Two of the three that contradict the relationship have the two smallest changes in the Gini coefficients in the sample.” (1999, p.19) What we are presented with here is a reason to redistribute wealth because unlike, the assumptions made in national income accounting, the poorer in society do receive greater utility with each additional unit of wealth at the margin than do the affluent.
Personal characteristics that are common within unhappy people seem to reinforce the need for social change. As we have seen being in a lower income quartile results in increased chance of greater unhappiness. In America, we see that non-white people also has a greater chance of being unhappy. Blanchflower and Oswald in there study estimate (which they even say we should be cautious of but which does symbolise the gravity of the situation) that “to ‘compensate’ for being black would take $30,000 per annum.” (2002,p.15) This shows the effect of social problems such as racism on subjective well-being, and the fact that the subjective well-being of black people in America actually rose during the time period of 1972-1998 of the study illustrates that the work on solving these social problems (which occurred with black rights movements in this era) can increase the welfare of society in an equally effective way as by raising their per capita income. However, it is worth noting in this same study the happiness of women actually fell over the time period, conveying an unexpected effect of their liberal rights movement over this period. In pure speculation I shall suggest that this is because more women by the end of the duration of the study had entered the workplace. This would entail increased stress and seems to correlate with the U-shaped happiness-age relationship for both men and women whereby several studies (Banchflower and Oswald: 2002, Di Tella et al.: 1997) have shown that the age where people are at their most unhappy is in their late thirties which is nearly the central point of ones working life. The reason for the up turn, “One tentative possibility is that this…may reflect a process of adaptation to circumstances; perhaps, by the middle of their lives, people relinquish some of their aspirations and thereby come to enjoy life more.” (Blanchflower and Oswald, 2002, p.18)

IV

So what does this study ultimately tell us about happiness, economic growth and society as a whole? What is apparent I believe is that growth orientated policies are not best at providing for the welfare of all of society. As Oswald says, “The relevance of economic performance is that it may be a means to an end.” (1997, p.1815) I have suggested that the end may be happiness for the individual and for the whole of society. However, in present society most people can’t achieve happiness in their job, and in many of their social interactions due to divisions in society. Ultimately, we find many people just can’t be satisfied with themselves. It can be argued that this unfulfilled satisfaction is rudimentary to the human make-up. Maybe, it is. The Aspiration theory whereby people continue to adapt to new situations and create new goals to pursue suggests so and makes perfect sense. However, maybe it is not. Veenhoven’s Innate Needs (Diener and Suh, 1997, p.15) approach to psyche of the human being is a proposed, albeit difficult solution to the problem. This is where peoples needs depend on organic needs (such as food and shelter), social needs (relationships with others) and self-actualisation needs (such as the utilization of one’s skills). A good society provides the opportunity for the fulfilment of all three. In modern society development is needed in the latter two if we are to enhance welfare but society is directing development toward the first factor, so much so that it is becoming detrimental to welfare. I think that we must stop this continued pursuit for comforts as it is making us less human; less productive socially; and is in the end, destructive to the planet. A course of action could be to stop worrying about one’s relative income to others for a start. If you have a job and you don’t find your job to your satisfaction, cut your hours! There are plenty of people who want work; who are literally dying for work. Expand your leisure time. Satisfy those social and self-actualisation needs. Better still, live a life whereby you can satisfy all three in work and leisure. Of course this is a difficult thing to do but it can be done. Most of our society is lucky to have such a comfort to be able to do such things; the major reason why more people don’t is because of self-interest and people being influenced by greed.
It is not that I am denying that people cannot be driven by self-interest nor is it refuting that people obtain happiness through social comparison. It is just stating that current society accentuates characteristics like these and suppresses others that could help in the pursuit of happiness. Capitalism has improved the lot of humankind. Most are now free from scarcity in western society. However there still are many problems in our society that make us unhappy, and these specific economic relations are partly to blame. This study has shown people need employment and if they can find it, work that utilises their skills. Capitalism does not provide this nor does it look like doing so in the near future. Also, This study shows the dynamics of capitalism dictates periods of unhappiness. It also shows that the long-term economic growth that results from the cycles and the concrete effects of it can never be said to be objectively better than before due the social and cultural changes that occur. My stance is that we should take a moral standpoint on the future of economic growth. Morality is our most viable option in transcending all social, political and cultural changes. If we view the economy to be virtuous place we may receive just consequences. Though the economy cannot assure happiness in our individual and collective lives it can facilitate and influence such consequences if we desire them.
‘Life, Liberty And The Pursuit Of Happiness.’ I was once told that the ‘Pursuit of Happiness’ component of the revolutionary phrase was meant to convey the right to property. It certainly seems so, in our consumer driven world. We find happiness in our goods and services and other things we own. My study has been to see if this actually does make us happier. Though more research is needed in this area, my findings show that there is a saturation point whereby once reached, more goods and more private property may be good for the individual who has plenty of such assets but are bad for society and the world as a whole. I have suggested that we pursue happiness of the more conventional kind. That is personal feelings of well-being, based on the enjoyment of life for oneself and for the others, founded upon virtuous activities.


BIBLIOGRAPHY
Bruno S. Frey and Alois Stutzer (2002): Happiness and Economics: How the economy and institutions affect individual well-being. Princeton University Press, New Jersey.
Tibor Scitovsky (1976): The Joyless Economy: an inquiry into Human satisfaction and Consumer Dissatisfaction. Oxford University Press, New York
Rafael Di Tella, Robert J. MacCulloch and Andrew J. Oswald (1997): “The Macroeconomics of Happiness”, The Labour Market Consequences of Technical and Structural Change, Discussion Paper Series No.19. Parchment Ltd, Oxford
Andrew J. Oswald (1997): “Happiness and Economic Performance”, The Economic Journal, 107, pp. 1815-1831
Richard A. Easterlin (1995): “Will raising the income of all increase the happiness of all? ”, Journal of Economic Behaviour and Organization, Vol. 27, pp.35-47
Charles Kenny (1999): “Does Growth Cause Happiness, or Does Happiness Cause Growth? ”, KYKLOS, Vol.52, pp. 3-26
Ed Diener and Eunkook Suh (1997): “National Differences in Subjective Well-Being”, Hedonic psychology: Scientific perspectives on enjoyment, suffering and well-being. New York: Russell Sage
David G. Blanchflower and Andrew J. Oswald (2002): “Well-being over time in Britain and the USA, Journal of Public Economics