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Easterlin, Maslow, and Stalin

July 15, 2013

Betsey Stevenson and Justin Wolfers were on Econtalk recently discussing their happiness and economics research and Eric Falkenstein recently wrote an article critiquing that interview. Happiness research has long been an interest of mine, although a bit less recently what with the financial crisis and impending collapse of liberal democracy. The short version is that Stevenson and Wolfers’ research shows that happiness increases with the log of income and Falkenstein is skeptical and points to the lack of clear correlation in their data and other research in the field. I’m not really qualified to judge the critiques of the empirical work either way, so I won’t comment on who I think is right.

However, where the critics of the “income causes happiness” side totally lose me is in their implications. Let’s suppose they are entirely correct and that increasing income in no way increases happiness. In this view, only relative incomes matter. I don’t think that justifies any of the policy implications they commonly advocate. Showing there is no correlation between income and happiness implies that redistribution is a waste of time also.

If you think the only thing making people happy is that they are richer than some other people, the conclusion that everyone should be equal does not follow. You could have a society where everyone is medium, or some are happy and some are sad. I don’t know which one is better. Maybe out of ten, everyone would be an 8 in a perfectly equal society, or maybe everyone would be a 2. It seems like even the poor like to think that one day they could be rich, but if everyone were poor and their were no chance for advancement, maybe everyone would be miserable. But the reverse is also possible. Maybe everyone would become content with their lives and stop worrying about happiness and be satisfied with forced stagnation/tranquility (depending on which side you are on).

We don’t live in a world where you can just push a button and instantly make everyone equal. There are only two ways to allocate resources: trade and violence. If resources are allocated by trade, the most productive and canny will be richer than others (the John Rockefellers and Steve Jobses of the world). If resources are allocated by violence, the most violent and those able to control violence will be richest (the Stalins and Pol Pots of the world). The most equal societies are neither figuratively cutthroat free market nor literally cutthroat totalitarian economies. They are countries with a balanced mix of the two approaches, but even they have some inequality.

I honestly don’t know. My intuition is quite clear – peaceful trade is superior to poverty and violence. But there are clear problems with my intuition – I can’t imagine how Allie Brosh can be so depressed for example. It doesn’t make sense to me how even when people have enough food, shelter, social approval, pretty much everything up Maslow’s hierarchy except for the tippy top, they can still be unhappy with their lives. I guess people always redefine their goals based on what they have. The “advancement or misery” model though also favors trade and development, because then there’s at least a chance people can improve their lives and be happy.

I’m not a Buddhist, but I’ve read the Wikipedia article about it, so I suppose I’m as much an expert on it as anyone :-). One idea about happiness which may be true is that it comes from within. Perhaps a person will be happy through spiritual means rather than worldly means. There will always be some suffering, whether a lot or a little, but maybe people can overcome their sensitivity to it by internal discipline and spritual elightenment. I know that’s not scientific at all, but it might be true anyway.

GDP is a crude measure for suffering and hardship. But then, suffering and hardship is a crude measure for happiness. Some people are able to work through their trials and find meaning in their lives. Others are pampered and lead easy lives and yet are still overwhelmed by seemingly minor problems. Maybe the human mind scales its stress reactions to its own reference points. The idea of a hedonic treadmill is appealing to me. This research suggests that people eventually return to a particular level of happiness regardless of their life circumstances.

I’m ambivalent about all these competing theories of happiness. What I am sure about is that the Red Terror is not an appropriate path to happiness.

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2 Comments leave one →
  1. July 16, 2013 11:46 am

    I have always though the same thing. If you only gain by being better off than others and equality is unattainable less inequality has little effect. BTW I am less jealous of Warren Buffet than of a man with a beautiful wife or a guy who is really built and athletic. (and my wife is very good looking for her age and I am pretty well built for my age).

    I asked around whether they would have their brain magically instantly transferred into the body of a well built black high school grad with no money or Warren Buffets flabby son, many people choose the well built black guy.

    • July 16, 2013 1:07 pm

      Jealousy is a vice for a reason. If you obsess over what other people have, you will never be happy, whether that is their body, their sex life, their intelligence, or anything. Utility is pretty subjective, as is happiness. Even if someone’s life looks great, maybe they are miserable inside. But that answer is very uneconomist. This issue is perhaps where my personal opinions differ the most from the typical “economist’s consensus.” I still think there is a lot of value in curing diseases, ending hunger, etc.

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