Our economic, private and social choices reveal what improves our wellbeing

David Willetts defended the government’s decision to spend my money finding out what makes me happy in The Times today (subscription required). He said it was not about creating a nanny state. However, it certainly seems to be about central planning. He asks, for example, what happens if the amount of time you can spend relating to others depends on the amount of time you spend commuting. The reasoning is that relating to others makes one happy, commuting therefore is reducing ones happiness and then, as David Willetts suggests, it helps the government plan transport links to know about these things.

Where do we start unpicking this web of fallacies?

Firstly, we do not need £2m to find out whether commuting takes time and therefore leaves less time for other things. I commute everyday and I can reliably inform David Willetts that, despite the fact that some of that time is used productively and reduces the amount of time I might have to spend reading material at home, commuting does reduce the amount of time available for other things – including volunteering. One can work that out deductively, one does not need empirical evidence.

Whether commuting makes me happier is a different matter. I have to weigh up the things I could buy with the money I spend commuting with the extra cost of living in London. I have to weigh up the subjective value of living in a reasonably spacious place with what I would regard as the subjective cost of living in central London. I can inform the ONS, without fear of contradiction, that I am happier commuting than living in London – taking into account all the time costs, transport costs, subjective benefits and benefits of cheaper housing. It is a myth to think that a centralised statistics-collecting body is more effective at determining how people should allocate resources than people themselves responding to price signals and so on. It is my actions that reveal my preferences after taking into account a lot of information – much of it subjective – that is known only to me. This information cannot be centralised. David Willetts knows enough about the development of economic thinking and the calculation debate to surely accept this argument.

If the government insists on planning railways then all it needs to do is respond to demand after taking into account the costs. Alternatively, it can allow the providers of railways services to do that instead. A middle way would be to have a regulated private system. This simply takes us to a debate about how to run our railways which does not need connecting to a desire to collect happiness data centrally. If I want to get to work quicker, I would be willing to pay for a quicker service – for that we need a responsive railway system, not happiness statistics. If I am happier working at home – which, as it happens, is exactly what I am doing right now – and that is of no cost to my employer then employers and employees can make appropriate arrangements.

Of course, some people may be prevented from taking the course of action that makes them really happy by, for example, planning controls. Maybe people want to commute less but have to live in Sussex because they cannot afford Surrey. But we know the extent to which they prefer to live in Surrey – it is indicated by the house price premium in that county. Some people would argue that the benefits of more countryside in Surrey outweigh the benefits of building more houses. If the government is going to use aggregate wellbeing data collected by central government to resolve such planning issues, it is barking up the wrong tree. It seems to me that there is no problem that exists today the solution to which is the collection of happiness data.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.