How to measure happiness, and a few thoughts on achieving it. Reflections on the economics of well-being

I recently came across an academic article looking at well-being and happiness, attempting to measure them as we would a statistic like GDP, in order to help us make judgements on the state of the economy and society. Following on from the 2009 Stiglitz Commission’s report on the measurement of economic and social progress, and in the light of the Office for National Statistics’ decision to collect data on happiness that has been doing the rounds in the UK media this week, I feel that it’s a good time to have a closer look at the issue.

The article in question was written by Andrew Oswald, Professor of Behavioural Science at Warwick Business School. His forthcoming article is a survey of the literature that has been written on the subject, ranging from economic works to medical studies. This post sets out to summarise and analyse what he’s saying. In his own words, “the essay’s principal argument is that mental well-being can be measured reasonably persuasively and that there is evidence that its level is declining.”

By the standards of history, material prosperity in economically developed countries is high. Nearly everyone has enough to eat, access to education and some level of medical care. Thanks to the industrial revolution, we’ve transitioned from a situation in which the majority of human labour was expended in agriculture, and in which most material goods were luxuries, to a situation in which only a small part of our economy is engaged in food production, and in which televisions and computers are viewed as necessities. The economy provides services and entertainment such that could not have been dreamed of a few hundred years ago. Improvements in our material circumstances – better housing, sanitation, electricity, communications – have made our situation very different to that of our ancestors. Sidestepping the issue of persistent poverty in some sections of the population, the developed world as a whole has never had it so good.

Yet around 15% of people in the UK suffer from mental health problems, and GDP growth does not seem to cause reported happiness levels to rise (this is the Easterlin Paradox). This suggests that our material circumstances are not all that matters, and that once a certain level of economic development has been achieved, the focus should be on making people happy rather than on producing more. This fits in strongly with the need for environmental sustainability. (The report does not deal with this issue, but it is one that could be strongly integrated with a focus on well-being. Doing this would allow for the development of an holistic new perspective on the aims of the economy.)

Research cited in the article shows that “work is central to emotional prosperity”.  And unemployment does not simply cause financial difficulties. 80% of the measured decline in mental well-being as a result of unemployment was not to do with the loss of income, but with wider problems such as loss of self-esteem and the resultant strain on relationships. I would take this point further than the article, and argue that even if one is in employment, work can cause problems with well-being. I recently read a fantastic book by Studs Terkel, called Working. It’s a series of interviews, conducted in early-1970s America, with a wide range of people doing a variety of jobs, with a focus on manual work. It got across just how central work is to life. It dominates your waking hours, and may take up all your reserves of time and energy, leaving you unable to pursue anything outside it. Work may be so menial, banal or unrewarding that it destroys you, somehow. With a mortgage to pay and a family to support, you have no way out of this situation, and constantly fear losing even this wretched toil, as without work, you will lose everything. I’ve had the luxury of enjoying every period of employment I’ve had, but many of us don’t. In looking at happiness and well-being from an economic standpoint, we need to place an analysis of working life at the centre of this. We need to ask what the purpose of work is, and we need to examine how we work, and how this could be improved. We’ve figured out how to make work productive. We now need to figure out how to make it rewarding.

(Matthew Crawford’s “The Case For Working With Your Hands” was another contribution to this debate, the message of which has been analysed here.)

The article goes on to discuss a load of different ways of measuring happiness and mental strain. I was particularly intrigued by the GHQ (General Health Questionnaire) method, which asks a series of mental distress questions, such as Have you recently lost much sleepy over worry? … felt constantly under strain? … felt that you are playing a useful part in things? … felt capable of making decisions about things? … been thinking of yourself as a worthless person?

The article makes the argument that there’s a positive benefit to the economy from having a happy workforce. Blanchflower and Oswald (2008), for example, have asserted that countries in which respondents say they are happy are countries in which there is less reported high blood pressure.  Of course, these two variables could be completely unrelated, and driven by other factors in these countries, but I’ll run with their argument for the moment, as it feeds into my next point. Their argument suggests that there may be positive aspects of having a happy workforce that the market does not take into account. In economics-speak, this is known as a positive externality. Because the market does not value it, it will be underproduced by the economy. Another example of a positive externality is the positive impact of going for a walk through a beautiful park, which will transform your whole day, but in ways that the market does not take into account. Of course, there can also be negative externalities. There are quite a few phenomena produced by the market which cause social costs that the market does not account for. Pollution is a good example. Leuchinger (2009), studied sulphur monoxide emissions, and was able to put a monetary value on the well-being produced by clean air.

I recently read an interesting piece by George Monbiot, in which he challenged this type of economic reasoning being applied to the natural world. He argued that “I understand why this approach is felt to be necessary. I understand that if something can’t be measured, governments and businesses don’t value it. … Even so, this exercise disturbs me. As soon as something is measurable it becomes negotiable. Subject the natural world to cost-benefit analysis and accountants and statisticians will decide which parts of it we can do without.”

I agree with Mobiot. Ideally, the point is not to integrate a wider understanding of costs and benefits into the market system, but to arrive at an economic reasoning that is not determined by private gain or focused on increasing production as the goal. We need a new system of economic values, rather than attempting to tinker with a system that is inherently blind to these problems.

Time to go back to the Easterlin Paradox. As mentioned before, whilst, on average, mental well-being is higher in nations with higher real GDP than those with lower real GDP, happiness does not seem to increase over time in these richer countries as GDP rises. The next section of Oswald’s article brings together a range of studies on well-being which suggest that it has in fact been measurably falling. Seven sets of research are explored. It is worth noting that Stevenson and Wolfers (2008) have criticised them, but (perhaps unsurprisingly, given that he’s selected them) Oswald judges in favour of the sets of research.

Oswald’s article concludes by arguing that more work needs to be done on the area of happiness and wellbeing. I don’t suppose that anyone will disagree with that. This will be a particularly important angle of analysis from which to view Big Society and spending cuts. The report collates a few suggestions as to why this apparent decline in wellbeing might be happening:

First, the Stiglitz report suggested that the nature of today’s work tasks might have had an impact. (As mentioned above, this is an area that I believe future research must explore.)

The second possibility suggested in the article is that an individual’s happiness is based on his material circumstances relative to his peers. Assuming that people want to be materially superior to those around them, if everyone advances in line with everyone else, nobody gets to feel superior. I think the article is a little off on this point. I’d say that inequality is probably more of a problem, with some people being left behind as others increase in wealth. Persistent poverty and social immobility are a serious problem. More fundamentally, the problem is that people are chasing happiness in material goods, and are taught to seek material superiority to others in order to be happy. We see happiness as something achieved in competition with others, and base it in material things. Change this outlook and this problem dissolves. This links in to the report’s final suggestion.

The third reason suggested is that “people may make bad choices and do things that, despite what they think, will not make them happier.” This is based on the work of psychologists like Daniel Gilbert (2006), and, I believe, has a lot of resonance with eastern philosophy. (In Buddhist philosophy, suffering arises through attachment to desires, as we pin our happiness on transient external things and suffer when things don’t go as we’d like, neglecting the true source of happiness.) The idea that people don’t always know what is best for them is quite unsettling, and challenges our ideas of individual autonomy and responsibility. I think it’s right, though. We’re conditioned to misunderstand how happiness works.

A massive problem we have is that we view happiness as a commodity, and as something competitive. Capitalism manufactures our desires, through advertising, and sets us up for disappointment. When the product we dreamed of owning turns out not to make us happy forever, we don’t question the system, but simply pin our dreams on the next lofty aspiration. Under this system our desires will never be satisfied. Because we mistake the source of happiness by looking for it in external possessions, we will always be searching for more. The system is adept at exploiting this fundamental void, and at shaping new desires that can never be fulfilled, however rich or poor we are. Whilst writing this piece, an advert came through my door, advocating buying a laptop as a present. “Give happiness” and “Give them everything they want” it boasted. But this can never be the case, and by pretending that it can be, it only serves to make everyone less happy.

I’d suggest that once a certain level of external comfort has been reached, perhaps well-being is obtained through meaningful work (whether it interests and engages the individual or contributes to society in a broader sense), relationships with others (giving these relationships the time and energy that they deserve) and self-understanding. To help right ourselves against the turbulence of the world around us, with possessions coming and going, jobs and homes insecure, and relationships strained by work and troubles, it helps to get a sense of who and what you are, before anything external (and therefore transient) comes into play. Because what you are is always fulfilling, cannot be threatened, and will never desert you. That’s where your happiness is.

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One Response to How to measure happiness, and a few thoughts on achieving it. Reflections on the economics of well-being

  1. Colin Sanderson says:

    Am enjoying reading many comments upon today’s announcement that the Office of National Statistics is to begin measuring happiness / well-being. That announcment makes me really quite happy. Best, Colin Sanderson

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