1. 1 Pursuing Happiness “ New Directions in Welfare II ”, Paris, july 6-8, 2011 Christian Schubert Max Planck Institute of Economics, Jena, Germany schubert@econ.mpg.de 1.Happiness Politics: two approaches 2.Towards a concept of the Pursuit of Happiness 3.Implications: Effective Preference Learning

2. 2 1. Happiness Politics: two approaches

3. 3  Policy supposed to maximize aggregate happiness (e.g. Layard 2005; Kahneman et al., AER 2004; Veenhoven, JHS 2010; Ng, SC&W 2003; Diener, Am.Psychol. 2000) Why? - More adequate picture (relative to GDP) of people‘s quality of life - Offers way to assess well-being in a world where individual preferences are potentially inconsistent and variable.

4. 4 Unfortunately, though, the maximization approach to HP is untenable: - Who is to do the maximizing? - Can happiness be aggregated? - Is there an end-state of perfect happiness? - If there is: Is there any connection to other valuable ingredients of the good life? (Is happiness a reliable normative guide?)  Alternative approach to HP needed!

5. 5  “Politics should help people pursue their own ideas of happiness” (Frey 2008; Frey & Stutzer, PC 2010)  Constitutional approach to happiness politics  But what exactly does it mean to pursue happiness?

6. 6 2. Toward a concept of the Pursuit of Happiness

7. 7 “Well,” said Pooh, “what I like best...” and then had to stop and think. Because although eating honey was a very good thing to do, there was a moment just before you began to eat it which was better than when you were, but he didn’t know what it was called. (Alan A. Milne)

8. 8 → Three building blocks: (1)Caring about the process i.e., the sequence of (goal-led, interconnected) experiences There are inter-temporal spillovers of utility → anticipation and recall (Loewenstein, EJ 1987) → hard-wired preference for improving sequences; experiences build upon each other in complex ways, they do not just “add up” (Loewenstein & Prelec 1993; Senik, JEBO 2008)

9. 9  But what‘s the content of valuable experiences (in a setting that extends over time)?  How does the sequence of interconnected (goal-led) experiences emerge in the first place?

10. 10 (2) Engaging in activities that are intrinsically valuable (  procedural well-being; Deci/Ryan 2000; Frey et al., JITE 2004) → public policy implications (examples): - enable people to actually engage in intrinsically valuable activities - enhance people‘s autonomy (Barrotta, Econ&Phil 2008)

11. 11  How does the sequence of interconnected (goal-led) experiences emerge in the first place? “Life is not fundamentally a striving for ends, for satisfactions, but rather for bases for further striving.” (Frank Knight)

12. 12 (3) Learning new needs (and preferences) …by reinforcement, associative and insightful learning (Witt, J.Evol.Econ. 2001) - partly sub-conscious processes driven by hedonic rewards processed in the brain - crucially driven by technological knowledge the consumer acquires (about the effectiveness of goods/services to satisfy newly acquired needs)

13. 13 → conceptual implication: preferences are tools, can be more or less instrumentally effective → their satisfaction at any given point in time matters less than the opportunity to acquire new ones.

14. 14 3. Implications

15. 15 → public policy implications: - stronger focus on institutional design - concern about people‘s choice environment (Anand & Gray, Kyklos 2009) - criterion: policy should design rules such the choice environment does not systematically prevent (discourage) people from trying out and learning effective new preferences (e.g. addiction; status races; overborrowing; dysfunctional welfare state programs)

16. 16 → theoretical implications: Adaptation Problem (Sen 1987) People tend to adapt their attitudes (i.e., inter alia, their preferences) to their circumstances (their opportunity set) Standard notion of happiness cannot address this issue

17. “A person who has had a life of misfortune, with very limited opportunities, and rather little hope, may be more easily reconciled to deprivations than others reared in more fortunate and affluent circumstances. The metric of happiness may, therefore, distort the extent of deprivation, in a specific and biased way. The hopeless beggar, the precarious landless laborer, the dominated housewife, … may all take pleasures in small mercies, and manage to suppress intense suffering for the necessity of continued survival, but it would be ethically deeply mistaken to attach a correspondingly small value to the loss of their well-being because of this survival strategy.” (Amartya Sen, On Ethics and Economics, 1987: 45-6)

18. 18 In light of the notion of Welfare as the pursuit of happiness: - The “hopeless beggar” etc. seem to no longer have reason to pursue happiness; - They are subjectively happy in a static perspective, but not in a dynamic perspective; - That is why they deserve our support.

19. 19 Thank you for your attention!