Happiness: the silver lining of economicstagnation?

Julian BagginiA study suggests that national wellbeing peaks at 22k average income. But thatdoesn't mean there's no point in pushing for wealth

Thursday 28 November 2013 16.56GMT

It's time to rewrite the story of the nancial crisis. Far from being a disaster movie, itwas in fact a tale of salvation. As for the green shoots of recovery we are now seeing,they are virulent weeds to be stamped out.

That would seem to be the conclusion to draw from a new study that suggestsever-rising national wealth is the source of decreased life satisfaction. Looking at datafrom around the world, Warwick University's Eugenio Proto and Aldo Rustichini ofUniversity of Minnesota conclude that average wellbeing rises with average incomeonly up to around 22k per head per annum. After that, it slips back again. Britain ismore or less at that sweet spot, which suggests economic stagnation may be anexcellent way of avoiding the problems of poverty without acquiring the problems ofwealth.

You may well be sceptical. Even the authors acknowledge that many people "stillprefer to live in richer countries, even if this would result in a decreased level of lifesatisfaction". In other words, people are overall more satised by less life satisfaction,which suggests we should take the whole concept of "life satisfaction" with a pinch ofsalt.

Any attempt to measure wellbeing in a robust way is fraught with problems. One ofthe most obvious is that people naturally rank their contentment relative to whatappears to be a reasonable expectation, and that varies with time and place. That'swhy, when oered to rank their life satisfaction a scale of one to 10, most choosearound seven or eight, irrespective of era or nation.

Even setting aside these doubts, there are more important reasons to be cautiousabout how we interpret the data. What it does appear to show, and which almost allstudies support, is that having a low income is more of a problem that having a highone is a benet. From a public policy point of view, that suggests the priority shouldcontinue to be raising the life chances of the worst o, not those of the better o, oreven the "squeezed middle".

Happiness: the silver lining of economic stagnation? | Julian ... http://www.theguardian.com/commentisfree/2013/nov/28/hap...

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TopicsHappiness indicesHealth & wellbeingEconomic growth (GDP)EconomicsPay

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If we achieved that, is it really the case that there would be no point in thenincreasing wealth even more? Not so fast. We have to ask what explains thelevelling-o in perceived quality of life. Proto and Rustichini suggest that the key is"higher GDP leads to higher aspirations driven by the existence of moreopportunities or by comparison with the Joneses". But this "sets up a race betweenaspiration and realisation; when realisation is lower than aspiration, thepsychological cost paid is disappointment". Worse, this creates a feedback loop, as thelet-down further widens the aspiration-realisation gap.

What should be clear is that this is not an inevitable consequence of greater wealth.Some individuals learn to treat their material comfort as a blessing and are notconcerned by the prospect that they could have yet more, or that others already do.The materialist treadmill is not one we are obliged to get on once we reach a certainlevel of income.

In short, the problem is explained by the familiar idea that money is not valuable initself, but only for what it can do. The failure of western societies to convert greaterwealth into greater wellbeing is in essence a failure to use our wealth wisely. Thisshould not surprise us. The majority of people alive today and throughout historyhave not been accustomed to plenty. Humanity is on a steep learning curve and manyof the lessons we need to learn go against our natural tendency to acquire rst andask questions later.

That's why the debate about the relative merits of increased GDP and "gross domestichappiness" are misguided. They are not mutually exclusive options. The optimalstrategy would be one in which we grew wealth but harnessed it better to enablepeople to really ourish, rather than just have more stu. What we should be afraid ofis the pointless march of a narrow materialism, not the resumption of economicgrowth in itself. A richer world in which the money was well spent is something withwhich we should all be well satised.

Happiness: the silver lining of economic stagnation? | Julian ... http://www.theguardian.com/commentisfree/2013/nov/28/hap...

2 of 2 24/06/2015 20:05