Economic Theory

Politicians wellbeing agenda flawed argue leading economists


Government and Institutions

The EU has failed to uphold property rights

Government and Institutions

Happiness is not related to national income or inequality
In an important report from the Institute of Economic Affairs* by economists Helen Johns** and Paul Ormerod*** the ideas and evidence that underlie modern politicians’ obsession with measuring and improving our “wellbeing” are comprehensively destroyed. The authors expose the myths surrounding so-called “happiness economics”.

Academics such as Richard Layard and senior politicians of all parties have recently proposed that governments should focus more on increasing citizens’ “happiness” or “wellbeing” and less on trying to maximise national income. The Department of Work and Pensions, for example, measures the success of its national strategy for an ageing society against 33 wellbeing indicators. David Cameron has suggested that politicians should focus on “putting joy in people’s hearts”, and government advisers have said that high taxes can increase happiness.

Proponents of using happiness measures in economic policy have pointed to the absence of a relationship between measured happiness and income to justify higher taxes. However, the research by Johns and Ormerod shows that happiness measures are not related to any conventional measure of welfare. Happiness data has been collected across a number of countries for many decades but there is no discernible relationship between happiness and levels of national income; unemployment; income inequality; inequality between sexes; violent crime; or property crime. Even people who are severely disabled or become blind recover their earlier levels of happiness within two years.

The authors show that there are insurmountable difficulties with measuring happiness using the methods currently employed by economists. As such, the happiness measures have no information content and should not be used for policymaking. The use of an index of happiness in policymaking would gloss over the genuine dilemmas and trade-offs that policymakers have to resolve. Targeting measured happiness could also be used by politicians as a pretext for implementing policies that will lead to an unacceptable loss of liberty and economic welfare or that are morally highly questionable – as has happened in the Kingdom of Bhutan which is the only country that formally targets measured happiness.

Challenged by the proponents of happiness economics to suggest an alternative to the maximisation of happiness as the objective of government policy, the authors comment, “A well-functioning democracy with a grip on reality are admittedly modest aims compared with the maximisation of world happiness, but they nevertheless take a certain effort to maintain. Proponents of the use of happiness measures are prepared to undermine economic freedom and democratic decision making in order to achieve the unachievable.”

*Happiness, Economics and Public Policy, by Helen Johns and Paul Ormerod, Research Monograph 62, Institute of Economic Affairs, £10.00.

**Helen Johns, Consultant, Economics for the Environment Consultancy (eftec).

***Paul Ormerod, Director, Volterra Consulting.