Economic misery

Does money really make us unhappy?

Benjamin Hunt

Topics Politics

The British have long been caricatured as a miserable bunch. But now, it seems, we are officially unhappy.

A variety of recent surveys claim that society is becoming less happy than in the past. In February 2003, Lord Richard Layard, co-director of the Centre for Economic Performance at the London School of Economics, gave a series of high-profile lectures on the subject. The UK government is now considering how to formulate policy around social happiness, after holding a special seminar on ‘life satisfaction’ in late 2002.

The ongoing discussion about our unhappy society is helping to create a new consensus. It is argued that many economic aspects of capitalism that were once presumed to cause happiness – more money, consumption and economic growth – do not. By contrast, it is suggested, happiness comes from non-economic factors, such as friendships, marriage and leisure activities.

Furthermore, economists and psychologists have developed theories implying that there is something intrinsic to modern capitalism that actively causes unhappiness. We are unhappily ‘addicted’ to money and spending – to use the fashionable expression, we are trapped on a ‘hedonic treadmill’. We are also said to be ‘polluting’ others psychologically and causing their unhappiness when we consume more.

A growing conclusion is that society should practise a form of self-restraint: in order to be happy, we should deliberately rein in our aspirations for more money. Society should try to limit its economic growth, to avoid its members polluting others in their quest for more consumption. The fact that the government is seriously considering how to create policies around these ideas suggests the need for a critical analysis of this ‘happiness’ discussion. How much is it an accurate, objective assessment of the society we live in today?

Britain in 2003 certainly exudes a general feeling of discontentment. There is a popular notion that life is increasingly stressful and superficial, lacking a clear sense of direction and meaning. This ill-defined discontentment, however, is related to broader social and political trends.

Commentators tend to exaggerate the notion of unhappiness, almost believing that society is now permanently miserable. And most confusing of all, they try to locate the causes of discontent in economic factors.

Economists, psychologists and others now seem to be working overtime to imply a link between economic aspects of life and social unhappiness. To elaborate their theories, virtually all commentators in this debate draw upon happiness research – surveys that ask people to rate how happy they feel. They are keen to point out that average happiness levels have not increased in Britain over the past few decades. On average, people have tended to say they are quite happy or thereabouts. Our happiness, it is said, is stagnating.

These static average happiness levels are then correlated with something outside the research: the reality of economic progress and the fact that society on average has become richer. It is then suggested that more money does not make us happier.

In a further attempt to imply a link between economic factors and unhappiness, psychological theories are drawn upon. Britain on the Couch, the influential mid-1990s book by psychologist Oliver James, subtitled ‘Why are we unhappier than we were in the 1950s – despite being richer’. James argued that our aspirations for more and more wealth essentially make us more discontented. Capitalism encourages people to earn and spend more and compete. Individuals become trapped on a ‘hedonic treadmill’ not of their own making – a never-ending pressure to earn and spend more and ‘keep up with the Joneses’.

Lord Layard’s February lectures expounded the same ideas. As an economy grows, people’s aspirations grow. But they become progressively more discontented with what they have – a process known in the jargon as ‘habituation’. And they want what others have: a variation on the theme of ‘rivalry’. They therefore become less happy with their income and material things over time.

The clear implication of this kind of analysis is that there is something about the process of earning money, consumption, and economic growth, that not only does not promote happiness – it actively makes us unhappy. But this is hardly convincing. If people report, on average, that they are quite happy over time, it is unclear why this represents such a problem. Also, there is little evidence to suggest that people’s material aspirations cause them emotional and psychological problems.

Many important considerations are left out of this discussion. Barely considered is the idea that, when people aspire for more, they can take advantage of what society has to offer. Barely considered is the commonsense notion that more money gives people more choices and opportunities in their lives.

However unconvincing it might seem to argue that economic aspects of capitalism cause us emotional damage, this theory is nonetheless forming the basis for new calls for economic restraint. The theory might be airy-fairy – but its practical consequences are potentially quite real.

For Lord Layard, the impulse for more income and spending is ‘essentially a problem of addiction…just like smoking’. The implication is that, like smoking, we are hooked on shopping; and may find it hard to impose limits on our behaviour. Consumption, for Layard, is also a form of ‘pollution’ (1). When you buy a better car, your neighbour looks out the window, feels unhappy with his or her own car, and wants a new one. Your individualism is said to be causing their misery. And the ‘polluter should pay’, suggests Layard, in the form of a new income tax rate of 60 percent.

Polly Toynbee, columnist for the Guardian newspaper, notes that this is a new ‘public morality’, expressing ‘self-sacrifice for the greater good’. But for her this is a good thing. Layard is ‘old Testament stern about the culture of endlessly pursuing personal pleasure…’, and a ‘necessary guru for our times, with a new moral language for some good old sentiments’ (2). Sentiments such as what, exactly? The notion that somehow if we all had less in our pay-checks, we would become more fulfilled? How about a poll asking people if they would be happier with less?

It is true that there is a widespread feeling of discontentment in society. But the idea that economic factors can be blamed for this, such as our aspirations to earn and spend more, is deeply flawed. Likewise, the idea that we should adopt self-restraint and place new limits on economic development is a hasty and irrational conclusion.

The concern with ‘happiness’ is based on a vague idealistic sense that, if we stop struggling to better our material standard of living, and stop trying to grow the economy, we would be happier. But this is misplaced. All that is likely to happen is that society will go down an irrational path of self-restraint, while complaints of ‘unhappiness’ will get louder.

Benjamin Hunt is the author of The Timid Corporation: Why Business is Terrified of Taking Risk, John Wiley and Sons, 2003. Buy this book from Amazon (UK) or Amazon (USA).

(1) Income and happiness: rethinking economic policy (.pdf 368 KB), Richard Layard, 3 March 2003

(2) Money and happiness, Polly Toynbee, Guardian, 7 March 2003

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Topics Politics


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