Civil Happiness

Economics and Human Flourishing in Historical Perspective

Luigino Bruni

• Publisher: Routledge
• Year: 2006
• Topic: Business
• eBook ISBN:
  9781134340514
• Subtopic: Business General
• Index: Business

Economists have long laboured under the misapprehension that all humans exist as rational beings that find happiness in maximizing their personal utility. This impressive volume presents an historical review of the evolution of economic thought, from economic philosophy to contemporary mathematical economics, and its critique of how the human and social dimensions of economics have been lost in this evolutionary process.

Examining the crucial period in the late eighteenth century when economists such Smith and Genovesi tried to reconcile the classical tradition of Civil humanism emerging commercial society, this key book analyses the impact that the hedonist approach to economics had in removing the ethical conception of happiness. In addition, it focuses on the impact that J.S. Mill, Wicksteed and Pareto had in shifting methodological thinking away from an emphasis on civil happiness. Simply put, this book is essential reading for economists everywhere.

1 Happiness, again

The Easterlin paradox

Not even the most critical observers can convince us that economic variables such as income, wealth or employment are not important objectives in life. Who can deny the evidence that wealthier people usually enjoy better health, longer life spans, lower infant mortality rates, and greater access to goods, services and education? From the enjoyment of such benefits it should take just one short step to affirm that, on average, those who possess more are happier than those who possess less. Yet one of the most important and worrying discoveries of the last decades is that such a step is not that short, nor that certain, and in fact can even take a negative turn.

Studies into the so-called “paradoxes of happiness” have brought the problem out of the closet. The term “paradoxes of happiness” refers, normally, to the empirical evidence, in post-war opulent countries, of longterm increases in wealth accompanied with constant or even decreasing self-reported individual happiness and/or life satisfaction.

Thanks to this paradoxical (contrary to common sense) evidence, happiness is once again of interest of economists, the “professors of the dismal science” (Carlyle 1850: 43).

The process of the rediscovery of happiness in Economics has been mainly a by-product of a process that originated in psychology. In fact, a paper published by Brickman and Campbell in 1971, under the telling title of “Hedonic relativism and planning the good society”, can rightly be considered the starting point of the new studies on happiness in relation to the economic domain. In their study, the two psychologists extended the “adaptation level” theory to individual and collective happiness, reaching the conclusion that bettering the objective conditions of life (income or wealth) produces no lasting effects on personal well-being. Such a thesis should have provoked a serious methodological storm about the nature and causes of the wealth of people. Yet it did not; the study remained practically unknown to mainstream Economics for years.

A few years later, two economists, Richard Easterlin (1974) and Tibor Scitovsky (1976), were persuaded that what was going on in that field of psychology could have something important to say to economic analysis. So, the “paradox of happiness” entered Economics, re-echoing to economic science its classical origins. In fact, the wealth–happiness nexus was central in the classical tradition – as we’ll see in Chapters 4 – 8.⁴

By utilising empirical research on people’s happiness, Richard Easterlin managed to open up the debate around the “happiness paradox” – also today called the “Easterlin paradox”. He made use of two types of empirical data. The first base was supplied by the responses to an opinion-poll type of survey in which a direct question was asked – a question which is still at the basis of most of the empirical analyses on happiness: “In general, how happy would you say that you are – very happy, fairly happy or not very happy?” (Easterlin 1974: 91). The other set of data Easterlin made use of came from more sophisticated research carried out in 1965 by the humanist psychologist Hadley Cantril (another forerunner of contemporary quantitative studies on happiness), concerning people’s fears, hopes and satisfaction in 14 countries. The subjects interviewed were asked to classify their own satisfaction on a scale from 0 to 10⁵ – in today’s World Values Survey questionnaires, happiness is ranked in “qualitative” terms (from “not very happy” to “very happy”), whereas life satisfaction is still measured using a Cantril methodology (a scale from 1 to 10).

Both types of data, then, were based on a subjective self-evaluation of one’s happiness or life-satisfaction – this subjective definition of happiness is a crucial point in the whole debate, as we shall see.⁶ They both produced, in Easterlin’s seminal analyses, the same results. Within a single country, at a given moment in time, the correlation between income and happiness exists and it is robust: “In every single survey, those in the highest status group were happier, on the average, than those in the lowest status group” (Easterlin 1974: 100). In cross-sectional data among countries, however, the positive association between wealth and happiness, although present, is neither general nor robust, and poorer countries do not always appear to be less happy than richer countries. In other words: “if there is a positive association among countries between income and happiness it is not very clear. . . . The results are ambiguous” (Easterlin 1974: 108).⁷ But the most interesting result came from the analysis of time-series at the national level: in 30 surveys over 25 years (from 1946 to 1970 in the US), per capita real income rose by more than 60 per cent, but the proportion of people who rated themselves as “very happy”, “fairly happy” or “not too happy” remained almost unmodified.

The main drift of Easterlin’s seminal paper came to be developed two years later in Tibor Scitovsky’s Joyless Economy (1976). Scitovsky – as we will see – added an original contribution, relying more on psychology. Hirsch (1977), Ng (1978), Layard (1980) and Frank (1985) all brought new insights into the explanations of the “Easterlin paradox”, which grew slowly but steadily. Today the debate on Economics and happiness is gaining greater and greater attention among economists, psychologists, sociologists and the public.

The theoretical debate about the paradox of happiness is contentious. Almost all scholars, from different backgrounds, agree on the results, that

over time and across OECD countries rises in aggregate income are not associated with rises in aggregate happiness. . . . At the aggregate level, there has been no increase in reported happiness over the last 50 years in the US and Japan, nor in Europe since 1973 when the records began.

(Layard 2005: 148)⁸

The relationship between income and happiness within a single country in a given moment in time is not controversial today among economists: almost all agree that a causal correlation running from income to happiness exists and is robust.⁹

Psychologists do not deny this correlation, but, in general, are less optimistic about the importance of income on well-being:

the effects of wealth are not large, and they are dwarfed by other influences, such as those of personality and social relationships. . . . [W]hen the sciences of economics and of well-being come face-to-face, they sometimes conflict. If the well-being findings simply mirrored those for income and money – with richer people invariably being much happier than poorer people – one would hardly need to measure well-being, or make policy to enhance it directly. But income, a good surrogate historically when basic needs were unmet, is now a weak surrogate for well-being in wealthy nations. What the divergence of the economics and well-being measures demonstrates is that wellbeing indicators add important information that is missed by economic indicators. Economic development will remain an important priority, but policies fostering economic development must be supplemented by policies that will have a stronger impact on well-being.

(Diener and Seligman 2003: 10)

Also among economists, however, the cross-country correlation between income and happiness is more controversial.¹⁰ As we have seen, in 1974 Easterlin did not find clear and evident correlation between happiness and income between different countries. Today most economists, using data coming from the World Values Survey, agree that a correlation does exist: “Various studies provide evidence that, on average, persons living in rich countries are happier than those living in poor countries” (Frey and Stutzer 2001: 19).

Layard makes an important distinction in the cross-countries analyses:

if we compare countries, there is no evidence that richer countries are happier than poorer ones – so long as we confine ourselves to countries with incomes over $15,000 per head. . . . At income levels below $15,000 per head things are different, since people are nearer to the absolute breadline. At these income levels richer countries are happier than poorer ones. And in countries like India, Mexico and Philippines, where we have time series data, happiness has grown as income levels have risen.

(2005: 149)¹¹

These issues are relevant in economic theory: explaining the happiness paradoxes calls into question some of the basic tenets of contemporary Economics – as we will see.

Before continuing, however, it would be useful to further explore the concept of happiness by comparing it with similar concepts.

Happiness and more

Mainstream economists have only recently begun to be interested in happiness, trapped as they were by the “iron curtain effect” of the hypothesis of rationality. However, social scientists in other fields have been working on the theme for decades. Sociologists were perhaps the first to find “empirical” indicators of the standard of living, that went beyond the GDP per capita. Back in the 1920s William Ogburn¹² launched a social research programme on “quality of life” which generated the important “movement of social indicators of the quality of life” that, a few years later, spread from the United States to Europe.¹³

The rise and diffusion of this movement were favoured by the cultural climate of the 1960s which sought to overcome a pure economic conception of the process of economic growth. There were many economists (e.g. Myrdal, Galbraith, Hirschman) who were also working outside of the mainstream of pure economic theory. Their works were sources of inspiration for many social scientists, and fostered research projects on the definition of social indicators. The aim was to find operational solutions capable of effectively quantifying the concept of “quality of life” in order to arrive at a sort of “social accountability”.

This “quality of life movement” (Offer 2003) emphasises mainly “objective” and normative (or ethical) ingredients of a good life, while the later “happiness movement” is characterised by a more “subjective” approach, based on self-reported evaluations (questionnaires). In fact, mostly thanks to Sen, the category of quality of life tends to encompass new indicators such as democracy, social capital, health, rights, freedom, working conditions and fundamental capabilities. In the 1990s, a “list of fundamental human needs” was drawn up that was mainly based on Sen’s and Nussbaum’s theory of capabilities. It developed into the United Nation’s Human Development Indicators, or HDI.¹⁴

Thus, Sen widens the vision of well-being in its scope and definition, and emancipates it from the mere absence or scarcity of material goods.¹⁵ For the past few years, Martha Nussbaum has been seeking to wed Sen’s approach with the basis of an Aristotelian and Stoic theory of happiness in order to arrive at an objectivisation of the “good life”.¹⁶ In her search to objectify and operationalise the capabilities’ approach, she concentrates her analysis on constitutional and political applications.¹⁷

Thus both the quality of life and the capability approaches consider self-reported happiness as only one component of well-being (a capability or a functioning), that has to be anchored on more objective bases.

Today happiness studies directly inspire research projects for new national indicators that include essential elements of well-being (on the basis of self-reported data),¹⁸ that are missing in the standard economic indicators such as GDP. The psychologist Ed Diener is one of the leaders in this new field that comes from Social Psychology, while the quality of life movement is a by-product of Sociology and Economics:

There was a time, when many basic needs were unmet, that economic indicators were a very good first approximation of how well a nation was doing. As nations became wealthier and basic needs were largely met, economic indicators increasingly missed their target. We have argued to this point that national economic indicators alone are now “out of sync” with national well-being in the developed nations. While wealth has trebled over the past 50 years, for example, well-being has been flat, mental illness has increased at an even more rapid rate, and data, not just nostalgic reminiscences, indicate that the social fabric is more frayed than it was in leaner times. These inadequacies lead us to advocate that an ongoing system of indicators be instituted by governments and organizations to track well-being over time.

(Diener and Seligman 2003: 21)

What is happiness?

As Diener and colleagues correctly note:

A widely presumed component of the good life is happiness. Unfortunately, the nature of happiness has not been defined in a uniform way. Happiness can mean pleasure, life satisfaction, positive emotions, a meaningful life, or a feeling of contentment, among other concepts.

(Diener et al. 2003: 188)

Economists do not even like the question, “What is happiness?” To them happiness is not a concept clearly distinct from pleasure, satisfaction or welfare. Ng (1997) defines happiness as “welfare”, for Oswald (1997) happiness means “pleasure” or “satisfaction”, and Easterlin is even more honest: “I use the terms happiness, subjective well-being, satisfaction, utility, well-being, and welfare interchangeably” (2001: 465). For Frey and Stutzer, “Happiness research in Economics takes reported subjective well-being as a proxy measure for utility” (2005: 116). The sociologist Ruut Veenhoven “use[s] the terms ‘happiness’ or ‘life satisfaction’ for the comprehensive judgment” (2005: 245). Happiness, for economists, is not generally defined but empirically measured, on the basis of the answers to questions such as: “How happy are you”? The questionnaires of the WVS (World Values Survey) ask people about both happiness (“How happy are you?”) and lifesatisfaction (“How much are you satisfied with your life?”), two data often used also in the academic analyses about people’s happiness. The Eurobarometer of the European Commission measures Europeans’ selfevaluation of life-satisfaction, and these data are often used as synonymous with self-reported happiness in economic analyses (see Oswald 1997). Inglehart, the coordinator of the World Values Survey, use the Subjective Well-Being (SWB) Index which is a combination of the responses to “happiness” and the responses to “life-satisfaction” questions.¹⁹

Some economists (Frank 1997, 2005; Layard 2005) use the category of SWB simply as a synonym for happiness, relying on psychologists for the definition. Actually, in psychological studies the story is more complex. In psychology, in fact, experimental studies on happiness began in the 1950s, and, in general, psychologists use the expression “happiness” with more precision than economists. Psychologists distinguish between: (a) “Life satisfaction”, which is a cognitive element; (b) “Affect”, the affective component; (c) SWB, defined as a “state of general well-being, synthetic, of long duration, which includes both the affective and cognitive component” (Ahuvia and Friedman 1998: 153).

Ed Diener, for example, proposes on the basis of abundant empirical evidence a hierarchical model of SWB where the four components are: (1) pleasant emotions (joy, contentment, happiness, etc.), (2) unpleasant emotions (sadness, anger, worry,...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Acknowledgements
• Introduction
• 1 Happiness, Again
• 2 Explanations of the Easterlin Paradox
• 3 From the “Civil” to the “Uncivil” Animal
• 4 Public Happiness
• 5 Genovesi and the Neapolitan School of Civil Economy
• 6 Happiness as Reciprocity
• 7 Adam Smith
• 8 The Cambridge Civil Tradition
• 9 Happiness Becomes Pleasure
• 10 The Solipsistic Foundation of Contemporary Economics
• 11 Conclusion
• Notes
• Bibliography