11. Workshop – Glück und Wohlstand – ein ökonomischer Blick auf das menschliche Streben

Schwarzenberg, 23.03.2006 – 26.03.2006


Workshop of the Progress Foundation, Schwarzenberg, March 23-26, 2006
Happiness and Prosperity – An Economic View on Human Aspirations

A Subjective Summary
Dr. Matthias Benz, University of Zurich

The discussions centered around a rapidly growing field of scientific research on people’s happiness or life satisfaction, investigating its contributions to our understanding of human aspirations and its potential implications for politics. The discussions were structured in six rounds and involved participants from science (economics, psychology, sociology, political science, history, philosophy, natural sciences) as well as participants from journalism, think tanks, and religion.

Can Happiness Be Measured?

The first round of discussion mainly centered around the question of whether happiness can be measured. Recent research suggests that the answer is yes, and some participants found this answer convincing. Measures of happiness correlate with other measures of human well-being, such as suicide or brain activity. It is thus interesting to study the determinants of happiness, and one can derive important insights on what makes people happy or unhappy. Others were more critical. First, it was argued that one should distinguish between happiness (a more short-term measure of positive or negative affect) and life satisfaction (a more long-term, cognitive measure of judgment). Second, the possibility to measure happiness was questioned more fundamentally. People included in happiness surveys might simply answer what is socially desired. For example, the French might be more reluctant to state that they are happy with their life (De Gaulle once said that “only the dumb are happy”), in contrast to Americans who might be overly eager to express their happiness. This makes it difficult to compare the happiness of nations, but then, there is also a lot of variance between countries that is interesting to explain. Measurement problems might be even more severe if people do not equate happiness with their “real” well-being, e.g., if they pursue other goals in life. Despite of these measurement problems, happiness research was seen to offer advantages by some participants, in particular in comparison to other approaches. For example, in contrast to the philosophical tradition, it leaves to individuals what they see as happiness or unhappiness, and it connects some of the shortcomings of Gross National product as a welfare measure. In the end, the participants did not heed the suggestion of one of the discussants: “If we agree that happiness cannot be measured, we can go home right now”. (But admittedly, this might also have had something to do with the very nice location and surroundings of the colloquium).

Income, Status Competition and Happiness

Do raising incomes make us happy? A text by Robert Frank (1997) suggested that this is not the case, As everyone gets richer, happiness stays constant, because we only derive happiness from what we have in comparison to others. Some found these “positional externalities” an important and real phenomenon. Interestingly, they imply that people can be worse off according to their own preferences. One way to solve this social dilemma is state intervention, for example in the form of a consumption tax, as suggested by Frank. But this conclusion met with fierce criticism. First, it was argued that in a dynamic view, status competition can have very positive consequences. It leads to innovation and advancement, not only in the realm of consumption goods, but in most domains of human life. Second, it was said that it would be difficult to judge which are status goods and which not. Should the line be drawn between a Ferrari and a Maserati, or already between a VW and an Opel? Doesn’t every good include a status component, but also non-status features? Third, it was mentioned that there are other ways in which individuals could overcome potentially detrimental status races. If there is an “arms race” in brand clothing among school children, shouldn’t parents have the possibility to choose a school which employs school uniforms? Fifth, there are also positive externalities in consumption, for example with respect to network goods. Should the state subsidize these goods in line with Frank’s externality argument? And sixth, as the most fundamental argument, it was brought forward that status competition is simply a part of human nature. It would always find its way: if it is regulated in one area, it would just switch to another area, with potentially even more detrimental consequences.

Indeed, recent research by economists suggests that adaptation plays an evolutionary role. Our happiness is only relative to our neighbors and to our own past because otherwise, we would stop striving for happiness, and this would be bad for our evolutionary fitness. Interestingly, a classical text by Adam Smith (175911984) was seen to make a similar point. The pursuit of wealth, he says, is vain for the single individual, but it advances mankind as a whole. Thus, it is good that “nature imposes upon us in this manner”.

The traditional fairy tale “Hans in Luck” by the Grimm brothers met with a surprising number of interpretations. What does it try to tell us? One interpretation was: the most supreme happiness does not lie in material possessions, but in the security and love of being with one’s mother. Another one: the tale wants to show us the opposite of what we typically think leads to happiness, and thus questions our concepts of a good life. A third: it’s a market, and the goods go to the ones that value them the most, it’s simply that Hans is not acting in a way that we think is economically sound, A fourth: we should only judge happiness from revealed behavior – it’s Hans’ free will to act like this, and he seems to be happy at the end, so we should accept it and not regard his actions as wrong. Finally, a fifth interpretation suggested that the tale ends prematurely: as soon as Hans’ mother would find out that he has given away a chunk of gold so foolishly, she would certainly slap him in the face.

Does Materialism Make Us Happy?

The third session started off with a discussion about the advances that happiness research can make to our knowledge. One side argued, with reference to “Hans in Luck”, that happiness measures permit economists for tire first time to go beyond the concept of revealed behavior and to measure utility directly. Thus, it can be identified whether individuals make mistakes. Hans, for example, may act in the way he does, but he might be unhappy with the consequences of his behavior. He may have made mistakes according to his own evaluation. This novel view was criticized, on the one hand, as too individualistic: quality of life is more than just individual happiness, and different measures should be looked at, such as life expectancy, education and GDP (like in the Human Development Indicators). On the other hand, the view was seen as misguided because it would lead to paternalism. In this respect, a text by Tim Kasser (2005), showing that materialists lead unhappier lives than less materialistic persons, was heavily criticized. Most participants held the opinion that his empirical findings offer no foundation for policy interventions whatsoever. Some discussants were reminded of their childhood or years of study when, first, the catholic church told them that material possessions were not the road to a good life, and later, the Frankfurt school tried to teach them that materialism is bad. Kasser’s text was seen in this tradition: if only people would reflect more and properly understand their situation, they would see that their current desires are wrong and that their real preferences are not materialistic. As a consequence, Kasser’s text was not only seen as illiberal, but also as naive. Contrary to his claim, there have always been strong movements fighting against materialism.

A second text discussed by Barry Schwartz (2000) claimed that too many possibilities of choice can make people unhappy rather than happier, because it overburdens them psychologically. Some discussants defended this view as very relevant, but also stressed that policy implications, such as restricting people’s choice sets, would not necessarily follow. It was argued that sometimes people limit their freedom of choice voluntarily, for example when they enter a marriage contract or an exclusive commercial relationship. ln situations where exchange breaks down without credible commitments, limiting possibilities of choice can even be the only way to secure a productive contractual relationship. Firms also react to the psychological overburdening of consumers, e.g. by offering less choices or simpler contracts. Thus, while Schwartz’s argument was seen as having merit, there emerged a consensus that it would not imply direct policy recommendations. Freedom of choice also implies that people limit their freedom of choice sometimes.

Work and Happiness

A text by Andrew C1ark and Andrew Oswald (1994) suggested that unemployment leads to considerable unhappiness. This empirical finding sparked a lot of interest in the discussion. Some argued that it helped to shed light on a long-standing debate in economics whether unemployment is voluntary or involuntary. The evidence was seen to provide support to those theories that treat unemployment as involuntary. If unemployment would simply be a period where people look for a new job (and enjoy the generous unemployment benefits), why should they be unhappier? But this view was also criticized. Unemployment could still be “voluntary” if the unemployed are a selection of generally unhappier people or if unemployment depresses people’s will to look for a new job. In a similar vein, studies show that overly generous unemployment benefits lead to longer unemployment, suggesting that it is at least partly voluntary. But the term “voluntary unemployment” was also criticized on more fundamental grounds. It was seen as deeply cynical, because many people would like to work, but in a highly regulated labor market, it’s just impossible for them to find jobs (e.g. because of too high minimum wages). Finally, an important topic addressed in the context of unemployment was the sustainability of happiness. Unemployment may affect people very negatively at the beginning, but they might also recover quite quickly, because they get used to it. Adaptation to other shocks, such as divorce, may be much less rapid. Thus, it was seen as important to study happiness over time, and to investigate what makes happiness sustainable (or unhappiness to fade quickly).

A second line of discussion centered around the question of what makes work a satisfying experience. Some argued that autonomy and interesting work that come e.g. with self-employment are a source of job satisfaction. Others took a more historical view. people working in agriculture were probably quite satisfied with their work, as suggested by Csikszentmihalyi’s (1990) text, but the following phase of industrialization led to quite unsatisfying jobs, whereas the rise of the service sector again promises to provide more rewarding work (because people interact more with others, have less physically demanding jobs and enjoy more flexibility). The meaning of work as reflected in different terms for the activity was also explored: “Beruf’, “travail”, “Schaffe”, “job”, etc.

Political Dimensions of Happiness

On the topic of “politics and happiness”, it was first argued that happiness research has a totalitarian potential. The measurement of happiness is not an innocent task. precisely because happiness is measured, politics will take up the measures and declare happiness as the ultimate goal of society, justifying a wide range of political interventions in order to “make people happy”. In history, many movements have taken this route: religions have declared happiness in the afterlife as the ultimate goal, communism has promised it in this life. Some participants proposed a contrasting program. Not happiness in itself, but the pursuit of happiness should be the goal of societies, as famously stated in the American declaration of independence. Societies should ensure that everyone has the possibility of pursuing his happiness (and, it should be added, his own view of happiness). This, of course, also entails the possibility of choosing an unhappy life.

But how should such a society be structured? It was mentioned that happiness research can give useful guidance, because different institutions can be compared with respect to the happiness they produce. For example, it was highlighted that the extent of freedom in a society explains a considerable part of happiness differences across nations. Relatedly, people have been found to be happier in more democratic countries. But the issue of democracy, in particular, raised an intense debate. Some claimed that it has normative value even beyond happiness, i.e. that democracy should not be judged only by its happiness consequences. Others stressed the potential of democracy to impose the preferences of a majority on a minority, thus oppressing the more fundamental value of freedom. Should freedom thus be placed above happiness? Some stressed that at least on average, freedom would lead to more happiness (if not for all), others argued that freedom would be a supreme value even if it made everyone unhappy.

Here, again, it was debated whether happiness is a legitimate goal for society. If there were a “happiness pill”, would it logically follow that governments ought to prescribe its consumption (or at least subsidize it)? By most, this was not seen as a solution. Taking the happiness pill would eliminate the evolutionary function of happiness. people would not engage in endeavors and struggle anymore, they would stop to seek enriching social contacts or cease to go out of their way to initiate change. And such a happiness, it was said, would not be a sustainable one. While individually, people might want to take a happiness pill (as they already take drugs such as alcohol), the pill would certainly not provide a solution for happiness at the level of society.

But also at the individual level, the goal of being happy was seriously questioned. Several discussants took up the quote: “Better Socrates dissatisfied than a pig satisfied”. Does this mean that there are other goals in life than happiness, say responsibility or justice? Some argued that the comparison was wrong, because it is a mistake to compare the categories of humans and animals, the latter lacking the ability of reflection. Others mentioned that Socrates was probably not an unhappy person at all, but rather very satisfied with his life as a whole. But it was also acknowledged that one might very well have other goals in life than just happiness. Freedom was mentioned frequently, but also moral development and a sense of responsibility for others. The history of philosophy shows, it was added, that people’s views of a good life have changed considerably over time.

The Road to Happiness?

The last round of discussion provided the possibility to summarize the main thoughts and to further debate the policy implications of happiness research. One recurrent topic was again whether happiness should be an ultimate goal, or whether the pursuit of happiness should be the most important criterion to organize societies. Another topic frequently mentioned was that happiness should not be seen as an end-state, but rather as a by-product of continual change.

The policy implications proposed in the text by Richard Layard (2005b) were heavily criticized as interventionist. It indeed declared happiness as a goal at the level of society and outlined some of the “right” ways to achieve it. But others saw substantial merit in Layard’s conclusions. On the one hand, it was argued that the text should be taken seriously, because the British government was already intending to follow his advice by tracking the happiness in the United Kingdom. On the other hand, some of the problems stemming from material progress mentioned by Layard were seen as important: mobility can destroy social bonds, and migration and inequality can lead to tensions between the first and the third world. Still other discussants saw a relatively modest, but still relevant role of happiness research. It can provide useful information for individuals how to avoid mistakes and improve their happiness (if they wish so), and it constitutes a useful input into the public discourse when it coms to deciding between different policy measures aiming at improving people’s lives.

After all, what happiness research certainly achieved was to spark a lively debate.

Literature used for the colloquium (in the order of discussion)

  • Layard, Richard (2005a). Chapter 2: What is Happiness? In: Happiness: Lessons from a New Science. New York: Penguin Press.
  • Schneider, Wolf (1978). Kapitel 6: Beredetes Glück contra empflrndenes Gltick: Warum Lebensbilanzen dubios und Meirtturgsun:fragen unbrauchbar sind. In: Glück, was ist das? Reinbek bei Harnburg: Rowohlt.
  • Frank, Robert (1997). The Frame of Reference as a Public Good. Economic Journal 107(445): 1832-1847.
  • Hans im Glück. In: Keel, Daniel und Gesine Treptow (Hrsg). Die schönsten Märchen der Brüder Grimm. Zürich: Diogenes, 2005.
  • Smith, Adam (1759 / 1984). Part IV.1.8 – IV.1.10. In: Raphael, D.D. and A.L. Macfie (Eds.). The Theory of Moral Sentiments. Indianapolis: Liberty Fund.
  • Kasser, Tim (2005). Materialism and its Alternatives, Forthcoming in: Csikszentmihalyi, M. (Ed.). A Life Worth Living: Contributions to Positive Psychologr. Oxford: Oxford University Press.
  • Schwartz, Barry (2000). Self-Determination: The Tyranny of Freedom. American Psychologist 55(1): 79-88.
  • Clark, Andrew and Andrew Oswald (1994). Unhappiness and Unemploynent. Economic Journal 104(424): 648-59.
  • Csikszentmihalyi, Mihaly (1990). Chapter 7: Work as Flow. In: Flow. The psychotog,t of Optimal Experience. New York: Harper & Row.
  • Lane, Robert (2000). Chapter 15: Political Theory of Well-Being. In: The Loss of Happiness in Market Democracies. New Haven: Yale University Press.
  • Layard, Richard (2005b). Chapter 14: Conclusions for Today’s World. ln: Happiness: Lessons from a New Science. New York: Penguin Press.
  • Sen, Amartya (1996). Rationality, Joy and Freedom. Critical Review 10(4): 481-494.
  • Schneider, Wolf (1978). Neuntes Zwischenspiel: Vom grossen Glück im kleinen Fenster. In: Glück, was ist das? Reinbek bei Hamburg: Rowohlt.


Geld (allein) macht nicht glücklich – aber der Staat erst recht nicht
Gerhard Schwarz, Neue Zürcher Zeitung, 15.04.2006

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