There Is Little Happiness to Be Found in Happiness-Based Policy (Mark D. White)

By Mark D. White

Governments around the world are starting to measure happiness (or subjective well-being) with the goal of a more humane process of policymaking. According to supporters, happiness-based policy will focus governments’ attention on what really matters to their citizens, their essential well-being, better than economic measures such as gross domestic product or national income that are too far removed from the day-to-day concerns of the people.

While the intentions may be good, the benefits of happiness-based policy are illusory at best and counterproductive at worst. There are fundamental problems with defining and measuring happiness, as well as implementing policy based on it, that prevent it from being a viable alternative to traditional policymaking based on GDP and other economic statistics.

First, the term “happiness” is notoriously difficult to define. Philosophers have tried to do this for centuries, identifying and detailing many types of happiness but arriving at no universal definition. Songwriters, poets, and novelists have done a better job describing happiness in all of its nuance and glory, but this does not provide a solid basis for measurement. For the most part, psychologists and economists who try to measure happiness do not worry about definitions, satisfied that “everyone knows what is,” but with no guarantee that everyone knows it to the be the same thing. Happiness is simply too vague a concept to define precisely enough for measurement without excluding what many people consider happiness to be to them.

Second, there is no straightforward way to translate an essentially qualitative and subjective feeling such as happiness into quantitative data. Most happiness surveys consist of questions about the respondents’ current state of happiness or satisfaction with their lives, which they answer on a numerical scale with the units labeled “very unhappy” to “very happy” or “the least satisfied I can imagine” to “the most satisfied I can imagine.” Even if the definition of happiness were clear, these labels are not. For instance, how a person interprets these labels depends critically on the experiences and circumstances of his or her life. A wealthy and successful CEO may feel she has not lived up to her potential, while the janitor in her building may be very pleased with his lot in life. Human beings have the ability to adapt to their life circumstances, which explains why people living in deplorable conditions may nonetheless report high levels of happiness and well-being. This also implies that the steps on the happiness scale are inherently subjective, nonuniform, and incomparable, rendering them unable to support the mathematical processes researchers need to perform on them to provide information for policymakers.

Finally, even if there were no problems with definition or measurement, happiness-based policymaking raises numerous ethical and political issues when it comes to implementation. For example, would the government target a growth rate for happiness? This is problematic in light of the “hedonic treadmill,” by which we work hard to achieve more happiness, only to adapt to that level and strive for more. In the end, we work more and more and end up with little increase in happiness, and the same would likely hold for official happiness “stimulus.” Another concern is the possibility of significant inequality of happiness: due to adaptation, the underprivileged may report levels of happiness that mask their circumstances while the affluent express dissatisfaction and boredom. Would we then redistribute resources from the poor who seem happy to the rich who don’t? Finally, people often give up some happiness now in exchange for more later, such as when they go to school or on a diet. How would government measures focused on the now take account of investments in the future? All of these are questions that policymakers will be forced to struggle with if they choose to base policy on measures of happiness.

Given the inherently vague, qualitative, and subjective nature of happiness, it is impossible to define and measure it well enough for the purpose of policymaking. This is not a simple matter of refining statistical techniques; the problems with happiness measurement are more fundamental than that.

There is, however, a better way. Instead of trying to determine what happiness is and how to measure it, the government can trust individuals to make choices in pursuit of their own interests. Instead of trying to boost the happiness of those doing fairly well, the government can devote its resources to alleviating the suffering of the poor. Instead of targeting the general level of happiness based on arbitrary definitions and inaccurate measurement, the government can address specific problems that their citizens tell them need to be addressed.

In short, the government does not need to define, measure, and evaluate happiness in order to find problems to address. There are enough problems facing the country that are readily apparent. Liberals, conservatives, and libertarians may disagree about the scale and scope of what government should do, but I think they would all agree that the government should deal with the problems at hand rather than invent new ways to find them. In the end, that may be the best way to make people happy.


1 me may 2014 sqMark D. White is chair and professor of the Department of Philosophy at the College of Staten Island/CUNY and currnetly serves as president of the Association for Social Economics. This post was originally published at Economics and Ethics and is reprinted with the permission of the author. It is based on his latest book, The Illusion of Well-Being: Economic Policymaking Based on Respect and Responsiveness (Palgrave) and an earlier article from the Review of Social Economy, "Can We—and Should We—Measure Well-Being?" He can also found on Twitter: @profmdwhite.


Levendis, "The Macroeconomic Consequences of Mixing Sunnis and Shias: A Bayesian Errors-in-Variables Approach"

ForumHow damaging is the Sunni/Shia split to the economies of Islamic countries? Is it better to be one or the other? Or is it better to have an even balance between the two? Answering these questions is complicated by the fact that the data are often missing or imprecisely measured. We employ the technique of Bayesian data augmentation to circumvent these two problems, and find that properly controlling for these features in the data leads to drastically different conclusions than what is found using ordinary least squares. We find that there is nothing in the differential nature of Sunni or Shia Islam to make one more economically prosperous than the other. Nor do we find any support for the popular hypothesis that Sunnis and Shias cannot mix.

John Levendis, "The Macroeconomic Consequences of Mixing Sunnis and Shias: A Bayesian Errors-in-Variables Approach." Forum for Social Economics, 43/3 (2014), pp. 254-274.


Caiani, Fumagalli & Lucarelli, "Contemporary Capitalism as a New Monetary Economy of Production: The Logic of Conventions, M&A, and LBOs"

ForumThe main changes of new capitalism concern mainly two spheres: the new technological paradigm and valorization process and the importance of finance. The main feature of the prevailing finance-led growth regime during the first decade of new millennium is then presented. In this perspective, particular attention is given to the analysis of the evolution and the logic characterizing mergers and acquisitions and leverage buyouts. After describing the main features of the contemporary accumulation paradigm, we therefore proceed to the reformulation of the schemes of monetary circuit by taking into account the structural changes induced by contemporary capitalism.

Alessandro Caiani, Andrea Fumagalli & Stefano Lucarelli, "Contemporary Capitalism as a New Monetary Economy of Production: The Logic of Conventions, M&A, and LBOs." Forum for Social Economics, 43/3 (2014), pp. 223-253.


Bresser-Pereira, "Inequality and the Phases of Capitalism"

ForumWe live in a capitalist world characterized by economic inequality. Inequality is a real curse, but it does not have to always increase. In different phases of capitalism, it may be increasing, constant, or decreasing, depending on the dominant type of technical progress (capital-using, capital-neutral, or capital-saving), on the organizational capacity of the workers, on the competition from other countries with lower wages, and on the prevailing degree of democracy. But distribution faces an economic constraint: the expected profit rate must remain attractive to business entrepreneurs. From the mid-twentieth century, we would expect technological progress to change from neutral to capital-saving, which would allow wages to increase at a faster rate than productivity. Indeed, this happened in the Golden Years of capitalism, but such progress stalled in the succeeding neoliberal years, dominated as they were by a class coalition of rentier capitalists and financiers.

Luiz Carlos Bresser-Pereira, "Inequality and the Phases of Capitalism." Forum for Social Economics, 43/3 (2014), pp. 199-222.


McCain, "Why Need is 'A Word We Cannot Do Without' in Economics"

ForumEconomists in the neoclassical tradition do their best to avoid using the word “need.” Social economists have traditionally been more open to discussions of need. Philosophic discussions of need are also scarce but nevertheless helpful. This essay will argue that need is “a word we cannot do without” in economics, and not only in social economics. Need is objective, satiable, and absolute, by contrast with want or preference as it is defined in neoclassical economics. With this clarification, 1) it is reasonable that public policy should consider need as well as want and aim to satisfy some needs, and 2) for some purposes, such as the economics of health care, conventional demand cannot be understood without the concept of need. Thus, even the narrower purposes of neoclassical economics cannot be achieved without clarifying and using the concept of need, in addition to the more usual motivational assumptions of neoclassical economics.

Roger A, McCain, "Why Need is 'A Word We Cannot Do Without' in Economics." Forum for Social Economics, 43/2 (2014), pp. 181-196.


From Piketty to Law and Political Economy

By Frank Pasquale

Thomas Piketty's Capital in the Twenty-First Century continues to spur debate among economists. It has many lessons for attorneys, as well. But does law have something to offer in return? I make that case in my review of Capital, focusing on Piketty's call for a renewal of the social science of political economy. My review underscores the complexity of the relationship between law and social science. Legal academics import ideas from other fields, but also return the favor by informing those fields. Ideally, the process is dialectic, with lawyers and social scientists in dialogue.

At the conference Critiquing Cost-Benefit Analysis of Financial Regulation, I saw that process first hand back in May. We at the Association of Professors of Political Economy and the Law (APPEAL) are planning further events and projects to continue that dialogue.

I also saw a renewed synergy between law and social sciences at the Rethinking Economics conference last month. Economists inquired about bankruptcy law to better understand the roots of the financial crisis, and identified the limits that pension law places on certain types of investment strategies.

Some of the organizers of the conference recently took the argument in a new direction, focusing on the interaction between Modern Monetary Theory (MMT) and campaign finance reform. "Leveling up" modes of campaign finance reform have often stalled because taxpayers balk at funding political campaigns. Given that private campaign funders' return on investment has been estimated at 22,000%, that seems an unwise concession to crony capitalism. So how do we get movement on the issue?

For MMT backers, the answer is relatively clear:

[M]oney is not a feature of our natural environment, but a social construct, mediated by law. . . . One profound implication of this view is that the common belief that the U.S. federal budget is constrained like a household budget is a myth. . . . The U.S. federal government does not need to tax or borrow in order to fund itself. Taxes accomplish many functions, but they do not “fund” federal government spending. . . .[For] the campaign finance reform community to increase its chances of victory in implementing its policies (especially those aimed at changing the initial distribution of economic power), it must provide a more truthful and accurate account of the relationship between governance and modern money. In order to win over skeptics, campaign finance reform advocates need to explain that neither the national fiscal position nor people’s checkbooks need suffer in order for a scheme like democracy vouchers to work. People need to hear that it is right and reasonable for them to ask that public money be put to work for public purpose.

We do see the unrestrained money-creating capacity of the government on display in endless rounds of "quantitative easing." The AIG trial reminds us that intervention can become extraordinarily fine-grained and manipulative. Modern monetary theorists seek to harness that power in favor of public purposes, such as infrastructure building, campaign finance, or other investments. And we should be under no illusion that they are trying to shift economics from a stable science to politicized ideology. Dominant paradigms of economics in general (and public finance and accounting in particular) are the site of constant struggle over values. Advocates of austerity push for "fair value accounting" and "dynamic scoring," for little discernible purpose other than upward wealth redistribution. If those committed to some baseline of infrastructure, health, and education fail to press back with our own theory of public finance, we will fail, both intellectually and strategically.

To return to my original, methodological concern: a renewed emphasis on a key legal insight (the government cannot default on debt it issues in its own currency) can lead to an adjustment to economic theory (MMT), which in turn informs a new legal proposal to get past the current, futile campaign finance reform debate. It's a movement from legal insight to economic insight back to legal insight, or L - E - L. Of course, any implementation of MMT-driven campaign finance reform will need to sidestep SCOTUS's AZ FECFCPAC v. Bennett strictures. But that will be a much easier task than, say, trying to impose limits on spending by wealthy candidates or corporations. Just as MMT gets us past the zero-sum logic of taxation and CBO scoring in fiscal policy generally, it transcends the usual "level playing field" or "equal influence" paradigm of campaign finance. The legal foundations of MMT make it both scientifically, and normatively, a better theory of our economic system than the dominant paradigms of monetary policy.


PasqualeFrank Pasquale is Professor of Law at the Francis King Carey School of Law, University of Maryland. His research addresses the challenges posed to information law by rapidly changing technology, particularly in the health care, internet, and finance industries. His book The Black Box Society: The Secret Algorithms That Control Money and Information (Harvard University Press, 2015) develops a social theory of reputation, search, and finance. He is also a prolific blogger, posting at both Balkanization and Concurring Opinions; this post is reprinted from the former with the permission of the author.


Pryor, "What Do the Elderly Do?"

ForumThe most direct way to find out what elderly Americans do is to study how they occupy their time and, if they are still in the labor force, in what occupations can they be found. This essay focuses on three key issues regarding the activities of those 65 and over: their average use of time in 41 different activities, especially how they employ the greater discretionary time available to them in comparison to younger adults; the factors underlying their rising participation in the labor in the first decade of the twenty-first century; and the occupations that elderly men and women are most likely to be found and how this has changed.

Frederic L. Pryor, "What Do the Elderly Do?Forum for Social Economics, 43/2 (2014), pp. 156-180.


Pitts & Kroncke, "Educational Attainment and the Gender Wage Gap: A Comparison of Young Men and Women in 1984 and 2007"

ForumThis study pools data from two sources to investigate the role of educational attainment in determining the gender wage gap. The empirical analysis reveals that the returns to education remained largely unchanged for young men but declined significantly for young women over the period 1984–2007. We find significant evidence of a decline in the returns to a Bachelor's degree for young women as well as evidence of increasing wage inequality over time among young men and women with a Bachelor's degree. Also, in 2007, the gender wage gap between young men and women was largest for those with a Bachelor's degree. Further, our analysis suggests that young women with a college education may confront more discrimination in the labor market than young women without a college education. We conclude that promoting educational attainment among young women may be a necessary but not sufficient condition for addressing the gender wage gap.

Joshua D. Pitts & Charles Kroncke, "Educational Attainment and the Gender Wage Gap: A Comparison of Young Men and Women in 1984 and 2007." Forum for Social Economics, 43/2 (2014), pp. 123-155.


Zax, Rosenboim & Shavit, "Effects of Expected Effort on Females in the Labor Market"

ForumWe introduce expectations regarding the amount of exerted effort by males and females into the “standard” labor market equilibrium. Using a theoretical model, we show that the gender wage gap increases when the expected effect is incorporated into the model. Based on a survey, we find that there are inaccurate expectations regarding the amount effort exerted by males and females. We argue that biased expectations lead to paying females lower wages and a higher gender wage gap than should be expected on the basis of effort exerted. We suggest marketing females' efforts as a policy tool to counteract these biased expectations.

Ori Zax, Mosi Rosenboim & Tal Shavit, "Effects of Expected Effort on Females in the Labor Market." Forum for Social Economics, 43/2 (2014), pp. 107-122.


Econogenic harm, economists, and the tragedy of economics (George DeMartino)

By George DeMartino

DemartinoIn a recent editorial in The New York Times Harvard economist N. Gregory Mankiw acknowledged that economists have:

only a basic understanding of how most policies work. The economy is complex, and economic science is still a primitive body of knowledge. Because unintended consequences are the norm, what seems like a utility maximizing policy can often backfire.

Mankiw infers from this grave epistemic problem an ethical duty among economists to apply the Hippocratic principle “first do no harm” when assessing policy. On this basis he assails both the Affordable Care Act and new initiative in the US Congress to raise the legislated minimum wage. Both “fail the do-no-harm test”: the Affordable Care Act will lead to the termination of some insurance policies that don’t meet the standards required under the law, while raising the minimum wage “would disrupt some deals that workers and employers have made voluntarily.” But of course, applying the Hippocratic principle consistently would also require Mankiw to assail rather than support those policies to which he has an ideological affinity. Like free trade (which he supports), for instance, the harms of which to US workers surely exceed those of Obamacare. As J.R. Hicks recognized seventy-five years ago, any policy intervention that affects relative prices—which is to say, all interventions —“benefits those on one side of the market, and damages those on the other.” Surely Mankiw knows all this. What is troubling, then, is not Mankiw’s worry about the potential harm of the economic policies he opposes. He is quite right to expose the harms he associates with one policy or another. The problem is the ineptness and obvious bias with which he introduces ethical concerns into policy debate.

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