Undercover Economist

Should the government try to maximise happiness?

“Money can’t buy me love,” sang The Beatles, although it is doubtful that this was a rigorous empirical claim. Still, nobody disputes that there’s more to life than money and a new book, The Origins of Happiness (UK) (US) argues that happiness should be a guide to government policy.

Two years ago this would have been part of the zeitgeist: one of Barack Obama’s senior advisers, the economist Alan Krueger, was a noted expert in “subjective wellbeing” (happiness to you and me), while former UK prime minister David Cameron also championed the idea. It now seems strangely out of step with the times: whatever you think is driving Britain’s current PM Theresa May or US president Donald Trump, it seems unlikely to be surveys of life satisfaction.

Still, it is easy to sympathise with Thomas Jefferson’s remark, shortly after he stepped down as US president, that “The care of human life & happiness, & not their destruction, is the first & only legitimate object of good government.”

The question is what that means for government policy — and whether the academic study of wellbeing can help. The five authors of The Origins of Happiness, including Professor Richard Layard of the London School of Economics, focus on answers to the question “Overall, how satisfied are you with your life these days?” on a scale of 0-10.

It’s not an absurd question, but if a group of academics proposed reforming a nation’s economic institutions and industrial strategy on the basis of answers to the question, “Overall, how rich do you think you are these days, on a scale of 0-10?” we might reasonably object that our evidence base was too fuzzy to provide much guidance.

Nor is it clear whether someone moving from three to four on the scale is enjoying the same boost to happiness as someone moving from seven to eight. And what does “10” really mean? Is it literally impossible to become happier from there — or, Spinal Tap-style, should there be room to go up to 11?

These questions might trouble only the philosophers, except that Lord Layard and his co-authors write of a “revolution in policymaking” based on findings such as “an extra year of education directly raises your own happiness by 0.03 points on average throughout life”. This suggests a confident policy swagger that I confess to lacking myself.

Still, a meagre kind of knowledge is better than no knowledge at all, and it would be wilful to ignore what people tell us about how they are feeling. So what do we learn?

First, we have a love-hate relationship with our jobs. We know from panel data (interviewing the same people more than once over time) that being unemployed is miserable and stays miserable for many years. This is a good argument in favour of policies that promote low unemployment — something Japan, Germany, the UK and the US have managed to do, and France, Italy and Spain have not.

But while unemployment is depressing, work itself is no paradise. Self-employed people are happier than employed people by the same margin that unemployed people are less happy. And Mr Krueger and Nobel laureate psychologist Daniel Kahneman have shown that of all the day-to-day activities we engage in, commuting and work are the least enjoyable — while of all the people we spend time with, colleagues are bad and bosses are worse.

The answer, of course, is more jobs, and better jobs, please. And for that matter, it seems that more time in satisfying romantic relationships would also help — but I prefer to leave the government out of that.

Lord Layard and his colleagues argue in general for evaluating government spending using “a method of cost-effectiveness in which the benefits are measured in units of happiness”. Some policies — such as providing ready-mix concrete floors to poor households in Mexico — pass this test easily. Others do not.

Lord Layard has long been an advocate of devoting more resources to treatment for depression and anxiety. He is right. Even a modest success rate would go a long way here. But beyond that, much depends on the capacity of government to deliver what matters. Better schools, we’re told, improve the emotional wellbeing of children, which is an excellent investment in happiness. Fine, but nobody is in favour of worse schools and the researchers confess to knowing very little about what features of a school are correlated with happy pupils.

There is much in the idea of an activist happiness policy to amuse or horrify anyone with laissez-faire instincts. But to the extent that we think governments can sometimes bodge their way into bettering the human condition, there’s a case to look at what people say makes them happy with their lives.

As a cautionary note, however, I offer Adam Smith’s warning against the person who “seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard”. Whether a politician seeks to maximise national income or national happiness, Smith’s critique rings just as true.

Written for and first published in the Financial Times on 26 January 2018.

My recent book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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