The Illusion of Well-Being

Economic Policymaking Based on Respect and Responsiveness

Mark D. White

• Éditeur: Palgrave Macmillan
• Année: 2014
• ISBN:
  9781137361158
• Sujet: Economics
• Sous-sujet: Econometrics

The use of measures of economic output to guide policymaking has been criticized for decades because of their weak ties to human well-being. Recently, many scholars and politicians have called for measures of happiness or subjective well-being to be used to guide policy in people's true interests.In The Illusion of Well-Being, Mark D. White explains why using happiness as a tool for policymaking is misguided and unethical. Happiness is too vague a term to define, and too general a concept, to measure in a way that captures people's true feelings. He extends this critique to well-being in general and concludes that no measure of well-being can do justice to people's true interests, which are complex, multifaceted, and subjective.White suggests instead that policymaking be conducted according to respect and responsiveness, promoting the true interests of citizens while addressing their real needs, and devoting government resources to where they can do the most good.

Chapter 1

Happiness

In this chapter, I’m going to discuss the current “hot thing” in policymaking—happiness—and use that as a springboard into other approaches to policy based on well-being. As we’ll see, happiness (or subjective well-being) seems to have clear advantages over more traditional measures of economic welfare (such as gross domestic product, or GDP). According to advocates, it respects the subjectivity of individuals’ goals and tracks their actual well-being much more closely than GDP does—and it may even be the same as well-being itself, in which case measuring happiness would be the perfect tool for the job. However, the reality is more complicated than that: given the nature of the concept of happiness, it is difficult to define it, measure it, and implement policy based on it without additional complications, problems that prove fatal to the entire enterprise. In addition, there is reason to doubt that happiness is the most important basis on which to make policy—or even an important one at all.

The Case for Happiness

It may seem odd to start a book about economic policy with a chapter on happiness. After all, Nobel laureate economist and philosopher Amartya Sen wrote that the purveyors of the so-called dismal science “are often seen as terrible killjoys who want to drown the natural cheerfulness of human beings in an artificial sea of gloom.”1 Instead, we tend to think of happiness as the domain of psychologists and therapists, spiritual leaders and gurus, and self-help authors and motivational speakers. You might not be surprised to know that philosophers have written extensively about happiness—and we will discuss some of their thoughts soon. But economists may seem the least likely people to explore happiness or stress its importance to policymakers.2 Today, however, economists are on the vanguard of modern happiness studies, motivated by their traditional focus on welfare and well-being and their search for a better way to understand it, measure it, and use it to implement policy—all goals that I will argue are futile, unnecessary, and even unethical.

To many, happiness studies promise to solve several longstanding problems with the economic basis of policymaking. Traditionally, economists use a measure of national output, such as GDP, to stand for the well-being of a nation’s citizens and residents.3 But as every Economics 101 student knows, GDP is not a good measure of the actual well-being or standard of living of a nation’s residents. The reasons are numerous, and few dispute them. For one, GDP doesn’t take into account the distribution of income from the nation’s output. GDP may be very high and growing from year to year, but if the nation’s citizens don’t share fairly equally in the income made from selling that output, then only some will be made better off and the rest will be left wanting. In other words, measures of national output can’t account for income inequality, a significant concern in many Western societies today (as demonstrated by the tremendous attention given to French economist Thomas Piketty’s recent book Capital in the Twenty-First Century).4

Another shortcoming of GDP is that it only counts market output and misses such things as unpaid household work, informal barter, and black market transactions. A woman who takes care of her grandchildren while their parents work is providing an invaluable service—literally, since this service is not “priced” in a marketplace and counted in national output measures, but also figuratively, in that it is of tremendous importance to the well-being of her family, community, and country. But since it is not counted in GDP, which policymakers target as an important economic measure and take steps to maximize, the government will devote little attention or resources to helping the grandmother in her essential work. This failure of GDP—along with its blindness to inequality and other shortcomings—results in a measure of well-being that is distanced from the actual well-being of persons.5

Aside from the technical issues, GDP simply fails to capture the qualitative aspects of what we normally think of as well-being in a meaningful sense. In an eloquent address in 1968, US senator and presidential candidate Robert Kennedy decried the failings of such a measure, explaining that it includes production of jails, locks, and cigarette advertising without accounting for their causes or effects, and also neglects the qualitative aspects of how we use the products the country makes, such as how they affect the health, education, and joy of our children. He summed up by saying that a national measure of production “measures everything . . . except that which makes life worthwhile.”6 Just knowing how much stuff a country produced in the past year doesn’t tell us much about how its people were able to translate that output (or income) into quality of life.

Governments (and the media) still report GDP figures and use them as one indicator for policy purposes, but economists discount it, preferring other well-being measures or other techniques altogether.7 Several nations around the world—most notably France and Bhutan—started promoting and implementing measures of “gross domestic happiness” as better indicators of well-being than GDP, which gave a tremendous boost to economists already researching ways to measure happiness and determine the economic causes of it. The term originated with King Jigme Singye Wangchuck of Bhutan in 1972 and has been measured there (along with GDP) ever since.8 French president Nicolas Sarkozy followed Bhutan’s lead in 2009, calling for happiness to be included in a new, broader measure of GDP developed by a panel of leading economists.9 And as I write this, Northern Ireland has announced it will follow Bhutan’s lead also.10

The reasoning is clear: if policymakers want to track the well-being of a country’s citizens, why not measure it directly rather than through an imperfect proxy such as GDP? Governments would still compute GDP, a valuable measure of national output, but they would supplement it with statistics reflecting other aspects of their citizens’ lives—including happiness—to get a more accurate picture of how that output is translated into well-being. As economists Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi write,

We should expect that a revised GDP measure will continue to be used as a measure of market activity; but it will be supplemented by measures that reflect more broadly what is happening to most citizens (measures of median income), what is happening to the poor (measures of poverty), what is happening to the environment (measures of resource depletion and environmental degradation), and what is happening to economic sustainability (measurements of debt).11

Even stronger advocates for happiness measures agree on the need for a number of statistics; for instance, Richard Layard, an economist and key figure in happiness studies, wrote that “happiness should become the goal of policy, and the progress of national happiness should be measured and analyzed as closely as the growth of GNP,” not to the exclusion of it.12 Others, however, promote a single measure: preeminent psychologist and Nobel Prize laureate in economics Daniel Kahneman and his colleagues have proposed a measure of national well-being that would directly measure the time spent on and the pleasure derived from various activities, which would then be used to manage not only what the people in a country are doing but how they manage their time while doing them.13

In additional to its practical effects on policymaking, happiness studies also have important implications for economic theory. This is true especially in the area of welfare economics, which studies the effects on aggregate well-being of the behavior of individual persons, firms, and governments.14 (To most economists, welfare is synonymous with well-being in general, rather than referring to government aid programs.) Welfare economics began as a practical version of utilitarianism, the school of philosophical ethics that maintains that ethical action—especially government policy, the target of early utilitarians such as social reformer Jeremy Bentham—should promote the greatest utility (or excess of pleasure over pain) of the greatest number of people.15

Suppose a policy, such as the construction of a new highway, was under consideration. The highway would increase the total utility of members of Group A, including people who would benefit from a faster commute as well as business located closer to the planned route, but it would decrease the total utility of the members of Group B, including residents who would be displaced to make room for the new highway as well as merchants along the existing route.16 If the total utility of Group A rose by more than the total utility of Group B fell—assuming these two groups include all the people affected by the new highway—than total utility would rise and the policy would be considered right by utilitarian standards.

This requires that policymakers compare changes in the utility of different people, which is very difficult—in fact, since we lack the ability to peer into other people’s minds, most economists and philosophers regard comparing utilities between people to be impossible. After all, what is it to say that a policy gave more utility to Bill than it took away from Bob? You could tell that Bill was better off and Bob was worse off, but there seems to be no way to compare the two changes to see which was larger. Since utility is an internal, subjective experience—similar to how any one person sees a certain shade of blue in his or her mind—there seems to be no way to compare the changes in utility of two or more people with any level of accuracy.17 This difficulty became known as the problem of interpersonal comparisons of utility, and it doomed efforts to engineer overall utility by adding up individuals’ utilities and using mathematical tools to maximize the total.18 It’s easy to say that the new highway will benefit some people and harm others, but it’s another thing altogether to try to compare these effects to determine whether the highway is a good or bad idea on the whole. To be sure, people make these types of judgments all the time, and there are good arguments based on pragmatism to support them in some cases. But as a theoretical matter, or even in practical cases in which the effects on people’s lives are significant, many consider the problems with interpersonal utility comparisons to be insurmountable.

Given these difficulties, this “old” welfare economics was soon replaced by a “new welfare economics” that focused on two tests to evaluate policy: one that avoided the problem of interpersonal utility comparisons altogether and another that tried to define it away. The first test, Pareto improvement, endorses only those policies that would make at least one person better off without making anybody else worse off. You can see how this avoids the problem identified before: Pareto improvement accepts that one person’s benefit cannot be compared to another’s harm and simply forbids any harms whatsoever. Since any positive benefit is greater than zero harm, Pareto improvements are guaranteed to increase total utility. At the same time, though, this test would reject all changes that produce any harm, even when common sense says that harm is small compared to the benefits. For instance, imagine that thousands of commuters would benefit from the new highway and the only person harmed was a single merchant that stubbornly remained near the old route. Although admirable in its concern for preventing harm, this rule would potentially freeze policymakers charged with shifting scarce resources from one department or initiative to another, a common policy problem in which harms are unavoidable.

The other test, Kaldor-Hicks efficiency, mimics the basic utilitarianism of the old welfare economics but tries to solve the problem of interpersonal comparisons of utility by redefining what “utility” is. Under Kaldor-Hicks, the effect of a policy such as the new highway on individual persons would be measured in dollar terms. Since dollars are easily comparable, policymakers who see that new highway benefits some by a larger dollar amount than it harms others can be confident that the highway is a good idea—and can even claim that the “winners” can compensate the “losers,” making everybody better off. (Whether this actually occurs, of course, is not often considered.) This would seem to make the old-fashioned way of practicing welfare economics practical, but it just shifts the problem from comparing dollar amounts to determining those valuations in the first place (a problem we’ll discuss later).

We’ll talk about these two tests more in Chapter 2; I introduce them here merely to show how welfare economists modified their methods to get around the problem of interpersonal utility comparisons. The important thing to realize in this chapter is that these “fixes” or workarounds are no longer necessary if there is a way to measure utility or well-being directly—which is exactly what happiness studies promise.19 If this promise is fulfilled, welfare economists can estimate and predict the effects of various policies on affected persons without having their hands tied by a “no-harm” restriction or settling for questionable monetary estimates of benefits and harm. If happiness or well-being can be measured accurately and reliably, in a way that makes interpersonal comparisons valid, then the old welfare economics can be revived in all its simplicity and directness.

Furthermore, who doesn’t like happiness? It is, according to many philosophers and psychologists, the ultimate goal of human activity—and if we can measure it and design policy to increase it, how can people possibly disagree? From the viewpoint of a cynic, it’s a fantastic rhetorical strategy, the equivalent of invoking family values and love of country—or the opposite of invoking Nazism—in a heated political argument. But even the hardened cynic can appreciate the sincere intuitive appeal of happiness studies. GDP is well suited for measuring the size and scale of national production or “the economy” traditionally defined, but little else, and certainly not any meaningful sense of well-being. If policymakers want to know about citizens’ well-being, then the measures developed by happiness scholars may be a tremendous improvement over GDP.

Not so fast, though—measures of happiness and well-being also have numerous practical and ethical issues, which we’ll explore in the next section, before asking whether policymakers should be concerned with citizens’ well-being at all.

The Problems with Happiness

The problems with happiness can be split into three general topics: definition, measurement, and implementation.20 Each one builds on the last—for example, part of the difficulty with measuring happiness stems from problems with defining it—but each one also introduces its own complications, so measurement would still pose problems even if happiness were simple to define.

Definition

Like justice or beauty, happiness is a notoriously different word to define. In her book Exploring Happiness, philosopher Sissela Bok wrote that “such abstract terms provide ideal vessels into which people can pour quite different, sometimes clashing, meanings.”21 We may all feel we “know” what happiness means, but what it means to me may not be what it means to you (or to the person looking over your shoulder as you read this, which likely does not make you happy at all). One of the pioneering figures in the psychology of happiness, Ed Diener, and several of his colleagues wrote that “the nature of happiness has not been defined in a uniform way. Happiness can mean pleasure, life satisfaction, positive emotions, a meaningful life, or a feeling of contentment, among other concepts.”22 In his book Stumbling on Happiness, psychologist Daniel Gilbert explained the problem this creates, claiming that happiness “is nothing more or less than a word that we wo...

Table des matières

• Title Page
• Copyright Page
• Dedication
• Contents
• Acknowledgments
• Introduction
• 1. Happiness
• 2. Well-Being
• 3. Interests
• 4. Respect
• Conclusion
• Notes