… and the Pursuit of Happiness … and the Pursuit of Happiness Wellbeing and the Role of Government EDITED BY PHILIP BOOTH The Institute of Economic Affairs First published in Great Britain in 2012 by CONTENTS The Institute of Economic Affairs 2 Lord North Street Westminster London sw1p 3lb in association with Profile Books Ltd The authors 9 The mission of the Institute of Economic Affairs is to improve public understanding of the fundamental institutions of a free society, with particular Foreword 14 reference to the role of markets in solving economic and social problems. Summary 18 List of figures and tables 21 Copyright © The Institute of Economic Affairs 2012 The moral right of the authors has been asserted. 1 Introduction 25 Philip Booth All rights reserved. Without limiting the rights under copyright reserved above, Politicians in a muddle 25 no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, GDP or GWB? 27 mechanical, photocopying, recording or otherwise), without the prior written Happiness and government intervention 30 permission of both the copyright owner and the publisher of this book. Made happy by government or free to pursue happiness? 31 A CIP catalogue record for this book is available from the British Library. ISBN 978 0 255 36656 4 PART ONE: GDP OR GWB? Many IEA publications are translated into languages other than English or are reprinted. Permission to translate or to reprint should be sought from the 2 The folly of wellbeing in public policy 39 Director General at the address above. Paul Ormerod Introduction 39 Typeset in Stone by MacGuru Ltd The GDP ‘straw man’ 40 [email protected] Wellbeing and measures of economic and social Printed and bound in Britain by Hobbs the Printers progress 44 Inherent weaknesses in happiness measures 48 5 The relationship between happiness and income PART TWO: HAPPINESS AND GOVERNMENT revisited 50 INTERVENTION Controlling economic and social life to ‘promote happiness’ 52 5 Wellbeing at work: any lessons? 131 Conclusion 55 J. R. Shackleton References 57 Objective and subjective measures of wellbeing at work 132 Compensating differentials 138 3 Subjective wellbeing, income, economic Is there a ‘business case’ for employer intervention to development and growth 59 improve wellbeing? 142 Daniel W. Sacks, Betsey Stevenson and Justin Wolfers Public policy and international comparisons 145 Introduction 59 Conclusions 152 Main findings 61 References 155 Background on subjective wellbeing 62 Within-country estimates of the satisfaction–income 6 Wellbeing and the size of government 160 gradient 65 Christian Bjørnskov International comparisons of satisfaction and income 70 Introduction 160 Satisfaction and economic growth 76 Government ability and incentives 162 Alternative measures of subjective wellbeing 84 Main determinants of national happiness 165 Conclusions 88 Government redistribution 172 References 90 Conclusions 173 Annexe 94 References 175 4 Are more equal countries happier? 98 Christopher Snowdon PART THREE: MADE HAPPY BY GOVERNMENT OR Happiness is flatlining 98 FREE TO PURSUE HAPPINESS? The ‘non-relationship’ between happiness and equality 100 The academic literature on happiness and inequality 104 7 The unbearable lightness of happiness policy 181 Happiness and relative income 108 Marc De Vos Can we deal with ‘income envy’ anyway? 111 The political rediscovery of happiness 181 Attitudes to inequality 113 Measuring happiness measurement 184 References 122 A shallow form of happiness 191 Happiness, freedom or justice? 196 Poor but happy? 198 about THE AUTHORS Conclusion 198 References 200 8 Lessons from Austrian and public choice economics for the happiness debate 205 Peter J. Boettke and Christopher J. Coyne Christian Bjørnskov Introduction 205 Christian Bjørnskov is associate professor of economics at Conceptual issues 208 Aarhus University in Denmark. He studied economics at Aarhus Practical issues 212 and obtained a PhD at the Aarhus School of Business in 2005. Negative unintended consequences 215 His research interests include political economy, institutional Concluding remarks 219 economics and happiness studies. Christian is on the edito- References 220 rial board of Public Choice and the European Journal of Political Economy and is affiliated with the Centre for Political Studies 9 Happiness is not within the government’s in Copenhagen. His research has appeared in a wide range of remit: the philosophical flaw in happiness journals, such as the Journal of Development Economics, the Journal economics 222 of Law and Economics, Public Choice and the Journal of Happiness Pedro Schwartz Studies. More details are available at http://pure.au.dk/portal/ Layard’s utilitarianism 223 da/[email protected]. An overriding aim for public policy? 225 Happiness as a public good 231 Peter Boettke The justice of the market 237 References 244 Peter Boettke is a university professor of economics at George Mason University (GMU) and the BB&T Professor for the Study of About the IEA 246 Capitalism at the Mercatus Center at GMU. He is also the editor- in-chief of the Review of Austrian Economics. Pete’s personal web page is http://econfaculty.gmu.edu/pboettke/. 9 … and the pursuit of happiness about the authors Philip Booth Paul Ormerod Philip Booth is Editorial and Programme Director of the Institute Paul Ormerod is the author of three best-selling books on of Economic Affairs and Professor of Insurance and Risk Manage- economics: The Death of Economics, Butterfly Economics and Why ment at Cass Business School, City University. He has written Most Things Fail, a Business Week US Business Book of the Year. extensively on regulation, social insurance and Catholic social He read economics at Cambridge and obtained an MPhil in teaching. He is a Fellow of the Institute of Actuaries and of the economics at Oxford, and in 2009 was awarded a DSc honoris Royal Statistical Society and associate editor of Actuarial Annals causa by the University of Durham for the ‘distinction of his and the British Actuarial Journal. He has also advised the Bank of contributions to economics’. Paul is a consultant but retains close England on financial stability issues (1998–2002) and has been a academic links and publishes in a wide range of journals, such visiting Fellow at Blackfriars Hall, Oxford University (2010/11). as Proceedings of the Royal Society (Biology), Physica A, Mind and Society and the Journal of Economic Interaction and Co-ordination. More details are available at www.paulormerod.com. Christopher Coyne Christopher Coyne is the F. A. Harper Professor of Economics at the Mercatus Center at George Mason University. He is also the Daniel Sacks North American editor of the Review of Austrian Economics. Chris’s Daniel Sacks is a doctoral student in the Applied Economics personal web page is www.ccoyne.com. Program at the Wharton School of the University of Pennsyl- vania. His research is supported by a National Science Foundation Graduate Research Fellowship. Marc De Vos Marc De Vos is a professor at the Ghent University law school and the general director of the Itinera Institute, a non-partisan policy Pedro Schwartz think tank based in Brussels. He frequently publishes, lectures and Pedro Schwartz is Professor Extraordinary of Economics at San debates on issues of European integration, globalisation, labour Pablo University in Madrid. His knowledge of utilitarianism and market reform, pensions, ageing, healthcare and the welfare state. happiness economics comes from work for a PhD thesis on The He has authored and co-authored numerous books and articles. New Political Economy of John Stuart Mill at the LSE, as well as his His most recent book is After the Meltdown: The Future of Capit- time at the Bentham Project. He writes on questions of political alism and Globalization in the Age of the Twin Crises (Shoehorn, philosophy from an economic point of view and is preparing an 2010). English translation of his book In Search of Montesquieu. For the IEA he wrote The Euro as Politics (2004). 10 11 … and the pursuit of happiness about the authors J. R. Shackleton Munich. She has published many articles that have appeared J. R. Shackleton is Professor of Economics at the University of in journals such as Contemporary Economic Policy, the Quarterly Buckingham and an IEA Fellow. He was previously Dean of the Journal of Economics and the Journal of Labor Economics. Business Schools at the Universities of East London and Westmin- ster. He has also taught at Queen Mary, University of London, and been an economic adviser in the Government Economic Service. Justin Wolfers His research interests focus primarily on labour markets and Justin Wolfers is an associate professor of business and public employment issues. He has published widely in both academic policy at Wharton University of Pennsylvania. He attended and popular media and has appeared many times on radio and Harvard University from 1997 to 2001 and has a PhD and an TV. AM in economics. Justin’s research interests include law and economics, labour economics, social policy, political economy, behavioural economics and macroeconomics. He is a research Christopher Snowdon associate for the National Bureau for Economic Research and is Christopher Snowdon read history at Lancaster University and currently affiliated with the Center for the Study of Poverty and has been a full-time author and journalist since 2009. His research Inequality, Kiel Institute for the World Economy and the Brook- focuses on prohibition, junk science and public health. He is the ings Institution. Justin has published articles in journals such as author of The Spirit Level Delusion and Velvet Glove, Iron Fist: A Contemporary Economic Policy, the Quarterly Journal of Economics History of Anti-Smoking. His most recent book is The Art of Suppres- and the American Economic Journal: Economic Policy. He has also sion: Pleasure, Panic and Prohibition since 1800.