Should developed nations pursue happiness rather than the pace of economic growth? To see more of our products visit our website at Mark Evetts, Cheltenham College

The fundamental economic problem is that human wants vastly exceed what can be provided by the planet’s finite resources. C Why do humans continue to demand more and more? Perhaps greed, population growth or globalisation is to blame? C Do those residing in developed nations have to re-evaluate their goals? C The economic problem Do they need to consider the pursuit of happiness rather than the pace of economic growth? C If the choice were between being poor but very happy, or wealthy but very unhappy, which would you choose? C

“It is the greatest happiness of the greatest number that is the measure of right and wrong.” Jeremy Bentham, A fragment on government, 1776 C In the present century most would accept that maximising happiness has to be a goal of every society – but what is happiness? C The pioneers of studying happiness 1 Some will say money, but a few may cite equality between men and women. C Or is it a clean environment, low crime, a good education, health or social mobility? C Unfortunately, we don’t know how to accurately measure human happiness. C

In the last decade of the 20 th century there was an explosion of interest in the relationship between economics and the concept to happiness. C A paper by Richard Easterlin in 1974 claimed that despite the fact that income per head in the USA had doubled between 1946 and 1970 average happiness had remained much the same. C However, David Cameron in October 2010 said:” From April next year we will start measuring our progress as a country not just by how our economy is growing, but by how our lives are improving; not just by our standard of living, but by our quality of life.” C Cameron said that a new measure of national well-being could give us a general picture of whether life is improving and could lead to government policy more focused not just on the bottom line, but on all those things that make life worthwhile. C The pioneers of studying happiness 2

Is national well-being not just another word for happiness? C But the government is not researching happiness, it is gathering data on well-being. Is well-being the same as happiness? C What if we were to refer to well-being as provision of a suitable environment in which happiness can flourish. C National well-being No-one can force someone to be happy, but they could create the right environment. C Is this why leaders of developed nations refer to well-being rather than happiness? C It is not hard to find government policy aimed at providing an environment in which happiness could reveal itself. C

According to economists Stevenson and Wolfers, money can buy happiness. C Their research indicates that the relationship between income and happiness hardly changes as incomes rise. C We never really grow tired of earning more. C Is the case closed for economic growth as an objective? 1 Stevenson and Wolfers say that: “If there is a satiation point, we are yet to reach it.” C

There is little doubt that wealthier nations are more pleasant places to live. C The pursuit of economic growth has been the objective of most developed economies for the last hundred years. C But according to Andrew Oswald of Warwick University: “Economic performance is... a means to an end.... Economic things matter only in so far as they make people happier.” C GDP is a measure of the economic value of goods and services exchanged on the market. C Increasing GDP per capita is often taken as a reasonable proxy for rising prosperity. C The problem is that GDP is a very blunt and crude measurement. C Is the case closed for economic growth as an objective? 2

For those living in developed countries, economic growth has been undeniably successful in raising well-being. C For developing economies economic growth remains a key objective as a means of raising the 1 billion people who live on less than $1 a day out of poverty. C However, one can question whether economic growth is the catalyst for unleashing the less attractive side of human nature – greed, competitiveness and selfishness. C In the 21 st century can we expect economists and others to realistically consider the idea that happiness is the new economic growth? C Are developed economies ready to entertain the idea that they have enough – enough cars, enough Panini toasters, enough mobile technology? C Is the case closed for economic growth as an objective? 3

Governments of developed countries are perhaps unwilling to shelve the objective of economic growth because it is the measurement by which they are judged accountable. C Rising GDP growth provides the ammunition for elected governments to sing their own praises. C But GDP is an inadequate measure of well-being as we have already seen. C For example, a study by Frey and Stutzer in 2004 showed that those who commuted an hour to work did not find that higher earnings compensated them for the time lost. C The pursuit of money at the expense of time can be a false economy in respect of happiness. C Is the case closed for economic growth as an objective? 4

The answer to this question is surely “No”. C However, the unwavering ambition to seek simply economic growth is unsustainable given the finite nature of the earth’s resources. C With a global population set to hit 9 billion in just over 30 years, and 20% of the current population earning 74% of the world’s income, should developed nations re-evaluate the goals which society strives to achieve? C As to which country is the happiest, this depends on the methodology employed. C According to the OECD Better Life Index in May 2013, Australia took the top spot followed by Sweden and Canada. The UK comes in at number 10. C Are happiness and economic growth mutually exclusive.