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Thursday, October 26, 2006

Happiness Is Not the Same As Welfare

Robert Frank says to be careful not to confuse happiness, which is relatively invariant to growth in the economy, and human welfare which increases as the economy grows:

Prospering May Not Make People Happier, but It May Make Them Healthier, by Robert H. Frank, Economic Scene, NY Times: ...The rapidly expanding literature on ... “subjective well-being” appears to suggest ... that when the incomes of everyone in a community grow over time, conventional measures of well-being show little change.

Many critics of economic growth interpret this finding to imply that continued economic growth should no longer be a policy goal in developed countries. They argue that ... it is relative, not absolute, income that matters. As incomes grow, people quickly adapt to their new circumstances, showing no enduring gains in measured happiness. Growth makes the poor happier in low-income countries, critics concede, but not in developed countries...

All true. But these statements do not imply that economic growth no longer matters in wealthy countries. The reason, in a nutshell, is that happiness and welfare, though related, are very different things. Growth enables us to expand medical research and other activities that clearly enhance human welfare but have little effect on measured happiness levels.

Subjective well-being is typically measured from responses to survey questions... [P]eople who report high levels of subjective well-being are more likely to initiate social contacts with friends and more likely to respond to requests for assistance from strangers. They are less likely than others to suffer from psychosomatic illnesses, seek psychological counseling or attempt suicide.

In short, self-assessments of subjective well-being tell us something important about human welfare. Yet the mere fact that they do not ratchet up over time provides little reason to question the desirability of economic growth.

The purpose of the human motivational system, according to psychologists, is not to make people feel happy, but rather to motivate actions that promote successful life outcomes. To be effective, this system should be flexible and adaptive, which it is. For example, people who become disabled typically experience deep depression after their accidents, but often adapt surprisingly quickly, soon reporting a mix of moods similar to what they had experienced before. Lottery winners invariably experience joy on receiving their windfalls, but often describe such feelings as fleeting.

Since life is a continuing competitive struggle, this is as it should be. Accident victims who can recover ... will function more effectively in their new circumstances than those who dwell unhappily on their misfortune. Windfall recipients who quickly recover their hunger for more will compete more effectively...

These observations highlight the weakness of subjective well-being as a metric of welfare. The fact that people adapt quickly to new circumstances, good or bad, is just a design feature of the brain’s motivational system. The fact that a paraplegic may continue to be happy does not imply that his condition has not reduced his welfare. ... Similarly, the fact that people may adapt quickly to higher incomes says nothing about whether economic growth makes them better off.

Critics of economic growth cite its threat to the planet’s survival. Yet it is not growth per se that threatens, but rather certain kinds of growth. Driving more S.U.V.’s causes harm, but taking more piano lessons does not. Any country with a government not beholden to corporate interests could easily curb environmentally harmful activities through taxation and regulation...

Environmentally sustainable economic growth promises to increase human welfare in a host of ... important ways. For example, as ... Benjamin Friedman reports in his book “The Moral Consequences of Economic Growth” ..., societies in which incomes are growing more rapidly also tend to support their poorest members more generously. Growth will support continuing investments in workplace safety... And it will continue to free people to spend additional time with their families.

But growth’s most compelling promise is continuing progress against premature death... American families with five children in 1800 often saw two or three of them die before the age of 10. That this no longer happens has been a landmark achievement.

Intelligently managed growth will hasten our quest to defeat diseases that continue to strike people down in the prime of life. The mere fact that rising incomes do not bolster self-assessed happiness levels is no reason to abandon this quest.

[Update: William Polley is uncomfortable with the phrase "Intelligently managed growth."]

    Posted by on Thursday, October 26, 2006 at 01:17 AM in Economics, Policy | Permalink  TrackBack (1)  Comments (13)

          

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    Robert Frank of Cornell says happiness is not the same thing as welfare. More importantly, while increasing GDP may not increase happniness much (his focus is on rich countries), it certainly contributes to a greater welfare; therefore, GDP growth is... [Read More]

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