Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Be happy not rich

By John McKinnon - posted Thursday, 17 November 2005


It was nearly 2,000 years ago that Jesus Christ said: “A man's life does not consist in the abundance of his possessions.” It is somewhat surprising then that it has taken until quite recently for economists to catch up. However, with recent publications from the Executive Director of the Australia Institute Clive Hamilton, Growth Fetish (Allen & Unwin, 2003) followed by his Affluenza (Allen & Unwin, 2005) and Lord Richard Layard’s, Happiness: Lessons from a new science (Penguin Press, 2005) it seems the point might be sinking in.

The point: wealth does not equal happiness.

Layard, in particular, not only demonstrates the feasibility of actually measuring happiness, but also examines the public policy implications of pursuing happiness rather than wealth. Perhaps not surprisingly, this leads to some policies that appear quite the reverse of those advocated by both major political parties in Australia.

Advertisement

Happiness, however elusive to achieve, is really quite simple to define. It is feeling good, as opposed to feeling bad. It can be measured in a couple of very different ways. First, people can simply be asked questions about how they feel. Such surveys might not sound very scientific but Layard describes various methods of independent verification that ensure these survey results can be considered quite robust. Second, advances in neuroscience allow researchers to measure happiness by types of brain activity. These measures have been shown to correlate well with measures obtained from psychological survey results.

These measures reveal that, in general, happiness in western countries has not increased despite significant increases in wealth since the end of World War II. Although increasing income does boost happiness for those living in poverty, this relationship breaks down once a certain level of wealth is achieved. In fact, comparing happiness across countries reveals that once incomes reaches around US$15,000 - 20,000 per capita, increased wealth has no impact on happiness.

So, for those of us in the prosperous west, what does impact on our happiness? Layard reports seven factors that large scale surveys have identified as affecting our happiness. These factors are:

  • family relationships;
  • financial situation;
  • work and job security;
  • community and friends;
  • health;
  • personal freedom (essentially civil liberties); and
  • personal values (a religious or spiritual aspect to life).

When the impact of these factors is measured qualitatively, the factors that have the largest negative impact on happiness are marriage breakdown, becoming unemployed, perceived poor health and low personal freedom (in that order).

It is now clear why increased wealth has not improved happiness. In the same period that average wealth has doubled, marriage breakdown has increased significantly. Community trust has decreased, job security has been sacrificed in favour of increased productivity and as people are flooded with media images of perfection, self perceptions of health and wellbeing have plummeted. Furthermore, once above the US$20,000 per capita income, it is wealth relative to peers that counts, not absolute wealth and this, of course, is a zero sum game.

Advertisement

As a consequence of this research, both Layard and Hamilton propose changing the objective of public policy from maximising GDP (a measure of wealth) to that of maximising happiness or wellbeing. Layard encourages the adoption of the underlying philosophic principle, promoted by 18th century lawyer, Jeremy Bentham, that society should aim at producing the greatest possible sum total of happiness.

Even more radical is Jesus Christ whose golden rule: “love your neighbour as yourself” applies at the level of each individual. Either approach would at the very least focus our attention on improving the lot of those at the bottom of our society. However, whatever the underlying philosophical or religious foundation, such an approach is now possible and produces quite different policy in a range of areas to that deriving from wealth maximisation.

One of the greatest impacts is on taxation policy. Traditionally taxation has been seen as a distorting influence, so carrying an assumption that lower tax is always desirable and therefore requiring a high level of justification. However, Layard shows that higher incomes work against happiness in two ways. The first is related to rivalry. If one person’s income increases, their happiness increases, but that of their peers decreases by up to one-third as much because relatively, their peers are now worse off. The second is what Layard calls habituation. That is, the increase in happiness from a rise in income reduces over time as people get used to the new living standard. For example, a new colour television resulted in significant happiness in 1975 but now only a plasma screen will do it. This habituation is unforeseen and therefore results in much wasted expenditure. Layard estimates that up to 30 per cent of increases in income are wasted in such over-investment in material possessions.

Layard’s conclusion is that taxation is therefore corrective, not distorting. This is a fundamental challenge to conventional thinking. According to these (admittedly) approximate numbers, a top marginal taxation rate of 60 per cent would be a “neutral” figure. It is, in fact, the typical marginal tax rate in Europe, where happiness is generally greater than in the US or Britain. The decreasing positive impact of wealth increases on happiness also suggests a strongly progressive taxation rather than the flatter income tax regimes being pushed currently (not to mention the regressive GST).

As described above, job security is a major source of happiness and unemployment a major source of misery. Under the proposed WorkChoices legislation, individuals should be able to trade security for income or other conditions. However, in practice, individuals do not have this choice: any such suggestion will cast doubt on one’s willingness to work. It is clear therefore, that job security and additional time for family and community activities (key drivers of happiness) need to be negotiated collectively. The WorkChoices proposal, with its emphasis on flexibility and individual negotiation, may potentially increase productivity and therefore wealth, but is bound to decrease happiness.

While not going into detail, it is clear that policies relating to health, family and community are also key to promoting happiness. Layard reports that mental illness causes the most misery in society. However, a recent report (“Goverment program failing unemployed: report", SMH, October 25, 2005) concluded government programs were significantly under-funded and under resourced. To make significant inroads into unhappiness, the resources applied to mental health would need to be increased significantly.

One further policy area demands mention. Television creates discontent by bombarding us with images of perfection and promising that we can achieve these through increased consumption. These promises are of course false but the process increases feelings of discontent. Hence arguably television advertising directly reduces happiness. Both Layard and Hamilton recommend restrictions on advertising including bans in advertising to children under 12-years-old. Layard suggests that all advertising be limited to the provision of factual information while Hamilton goes even further. Such proposals may seem radical but only “radical” if society’s aim were to maximise wealth and not happiness.

Wealth and happiness are not necessarily mutually exclusive. However, for those of us in western countries, pursuit of one may lead to less of the other. The current consensus is that wealth maximisation should be the goal of public policy. Richard Layard has now given us an alternative. The challenge now is to convince our major political parties that we would rather be happy than rich.

  1. Pages:
  2. 1
  3. 2
  4. All

Article edited by Peter Coates.
If you'd like to be a volunteer editor too, click here.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

44 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

John McKinnon is the NSW State Co-ordinator for Tear Australia, a Christian aid and development organisation. Until mid 2005, John worked as a senior executive in the finance industry. He lives in Sydney with his wife and four children. John has a BSc (Hons) in mathematics and an MA in Biblical Studies (New Testament).

Other articles by this Author

All articles by John McKinnon

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of John McKinnon
Article Tools
Comment 44 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy