It’s inarguably true that while GDP has grown exponentially for the past half-century, human happiness has remained relatively flat. All the same, as an economist it baffles me when these two facts are put forth as evidence that capitalism, markets, and economic growth are one big mirage, with only minor links to human welfare.
The measures of happiness to which most people refer are self-reported and have been taken across countries over many decades. These reports typically rate people’s happiness on a relative scale from very unhappy to very happy. If, in the 1950s, people rated their happiness a 7 on a scale of 1 to 10, and happiness supposedly increases with per capita GDP, then by now happiness would have to be at least a 15 on a 1 to 10 scale! Clearly, we can’t assume that when GDP increases, happiness increases right along with it.
Aha, but isn’t that what the critics of capitalism have been saying all along (PDF)? No matter how wealthy we get, we ultimately think of our happiness in relative terms; therefore, we’re never really happier than before.
This may very well be true, but ask yourself: would you rather be “happy” in a society where people use outhouses, nobody ever leaves their village, and the average life expectancy is 40? Or would you rather be “happy” in the contemporary U.S. or E.U.? I thought so. And the simple fact that life expectancy has increased so much over the decades points to an immense increase in overall happiness, since people have so many more years to enjoy whatever level they have; 40 years of being happy is only half as much as 80 years.
The basic point so far is that people tend to judge their happiness compared to current norms (PDF), so that happiness is continually dependent on greater levels of material comfort and well-being. This is far from trivial. In addition, while overall levels of happiness at a given point in time may not be much greater than in the past, happiness is not the only important metric in society. Opportunity, levels of knowledge, convenience, variety, and a host of other variables influence people’s lives in positive ways. True, my happiness might not really be too dependent on how many flavors of ice cream there are; nevertheless, given a certain level of happiness, I prefer a world with more flavors than fewer.
As to what actually makes people happy, it is no mystery. Love, friendship, spiritual connectedness, a sense of purpose; these have been the keys to happiness from time immemorial. That money doesn’t buy these things is self-evident; therefore, to assume a linear relationship between GDP growth and happiness is patently ridiculous. Once again, however, this hardly means that economic growth isn’t good.
The logic of the anti-economic growth crowd becomes really perverse as it relates to marriage and lifespan. One of the many reasons divorce rates are higher nowadays is that people are living longer; it is simply easier to stay married when you only live to 50 than when you live to 85. (Since we know that divorce is often traumatic and associated with a deep sense of failure, if we really want to make people happier perhaps we should help them die sooner!)
There is another key misapprehension: that somehow happiness is the primary goal in life. While certainly worth striving for, happiness is hardly the only worthy goal; how about facing challenges, trying new things, sacrificing to care for others, expanding one’s intellectual capacity? These endeavors may bring happiness, or they may also bring frustration, sadness, longing, and pain; still, that doesn’t mean they should be avoided.
Unsurprisingly, it is always those in the most privileged positions (who travel the world and have every luxury at their disposal) who are the first to question the need for economic growth. More often than not, this is because of the supposed links between growth and the destruction of the environment — links which are tenuous at best. Wealthy environmentalists like to tell poor people in the developing world that there’s really nothing to be gained from having cars, TVs, supermarkets, and all that superfluous stuff that doesn’t really make you happy anyway. There’s no need to consider developing into industrial societies because that might threaten all the pretty places they love to visit.
There are also those who rightfully point to the connection between global warming and GDP growth, but again, they tend to minimize the essential lessons: 1) it is the wealthier countries that produce much more output per unit of energy (i.e., growth doesn’t necessarily mean more physical throughput), 2) it is the wealthier countries that have the technological capacity to innovate and reduce CO2 output, 3) it is wealthier countries that have the political institutions required for effective strategies aimed at combating climate change.
All of which means that environmentalists had better get serious about helping the poorer nations get a taste of all those “non-essential” material goods we take for granted. Those nations are not going to listen to people who have it all telling others to forego the good life.
And when development occurs in those places, an amazing thing will likely happen. As their essential needs get met, the people in these countries will increase their demand for environmental protection. Such a confluence is only possible when people realize that while GDP growth may not make people all that much happier, it gives us our best chance of creating an equitable world where everyone at least has the potential to be happy, where the environment is protected, and where we can experience all of life’s adventures for a very long time.
So instead of campaigning against economic growth, a much more constructive approach would be to campaign against perverse subsidies (PDF) and protectionist trade barriers, and to promote technology transfer from rich countries to poor ones.
P.S. Harvard economist Benjamin Friedman has come out with a book, The Moral Consequences of Economic Growth, that addresses a lot of these issues. One of the main points he makes (with which I wholeheartedly agree) is that median GDP growth, not per capita GDP growth, is the correct metric for a society’s well-being. Unfortunately, median GDP has been decreasing in the U.S. for the last six years, and surprise, surprise, with this decline has come increased anti-immigrant sentiment and a move towards religious extremism. For a great discussion with Dr. Friedman on NPR click here.
P.P.S. Another book on the history of happiness just came out as well; for a great discussion with the author and others on NPR click here.
