STOCK MARKET WATCH -- Tuesday, 4 December 2012

[Demeter]

5. Happiness Is Equality

http://www.project-syndicate.org/commentary/economic-equality-and-life-satisfaction-by-robert-skidelsky

The king of Bhutan wants to make us all happier. Governments, he says, should aim to maximize their people’s Gross National Happiness rather than their Gross National Product. Does this new emphasis on happiness represent a shift or just a passing fad?

It is easy to see why governments should de-emphasize economic growth when it is proving so elusive. The eurozone is not expected to grow at all this year. The British economy is contracting. Greece’s economy has been shrinking for years. Even China is expected to slow down. Why not give up growth and enjoy what we have? No doubt this mood will pass when growth revives, as it is bound to. Nevertheless, a deeper shift in attitude toward growth has occurred, which is likely to make it a less important lodestar in the future – especially in rich countries.

The first factor to undermine the pursuit of growth was concern about its sustainability. Can we continue growing at the old rate without endangering our future? When people started talking about the “natural” limits to growth in the 1970’s, they meant the impending exhaustion of food and non-renewable natural resources. Recently the debate has shifted to carbon emissions. As the Stern Review of 2006 emphasized, we must sacrifice some growth today to ensure that we do not all fry tomorrow. Curiously, the one taboo area in this discussion is population. The fewer people there are, the less risk we face of heating up the planet. But, instead of accepting the natural decline in their populations, rich-country governments absorb more and more people to hold down wages and thereby grow faster.

A more recent concern focuses on the disappointing results of growth. It is increasingly understood that growth does not necessarily increase our sense of well-being. So why continue to grow? The groundwork for this question was laid some time ago. In 1974, the economist Richard Easterlin published a famous paper, “Does Economic Growth Improve the Human Lot? Some Empirical Evidence.” After correlating per capita income and self-reported happiness levels across a number of countries, he reached a startling conclusion: probably not.

Above a rather low level of income (enough to satisfy basic needs), Easterlin found no correlation between happiness and GNP per head. In other words, GNP is a poor measure of life satisfaction...