FOURTEEN

CREATING HAPPINESS AS WELL AS GOODS

Suppose an economy manages to produce a high and steady rate of GDP growth. This sounds like an ideal economy. It would mean that per capita productivity is rising and there are potentially more goods and services for the citizens. But would citizens necessarily be happier? Would citizens attain a higher level of well-being?

French economist Daniel Cohen of Dauphine University raises the question: “Why is it getting harder to be happy, despite developed countries’ increasing wealth? Why doesn’t money make us happy?” He points out that French citizens are one-third less happy today than in 1950, although their income is twice as high. He answers his own question by saying that economics focuses us on competition while it is cooperation and free-giving that make us happy. He wonders if the time has come for developed economies to give up the idea of growth.

We have to distinguish the impact of economic growth on happiness and, separately, its impact on well-being. Happiness is the harder condition to measure. Happiness can fluctuate from day to day. Happiness is adversely affected by major events such as losing one’s job, getting divorced, or having a major health problem. Happiness is positively improved when someone has good friends, is involved in a meaningful activity, and is making a difference in the lives of others.

We can ask people to indicate their happiness on a five-point scale where 1 equals very unhappy and 5 equals very happy. “Would you describe yourself as generally a very unhappy person (1) or a very happy person (5) or something in between (2, 3, or 4), most of the time?” Then we can try to measure how people’s level of happiness correlates with various personal factors such as their background, religion, occupation, age, income, and so on.

Economist Richard Easterlin published a famous paper in 1974 entitled “Does Economic Growth Improve the Human Lot?”¹ After comparing per capita incomes and self-reported levels of happiness across several countries, he didn’t find a correlation. He even found certain countries with some of the poorest people were the happiest. In later research, he found that within a given society, the very poor are generally unhappy and the very rich are quite happy, but he found little correlation at intermediate levels. Happiness at a national level does not continue to increase with added wealth once people have enough money to satisfy their basic needs.

First, happiness is partly conditioned by a person’s genes, with some people born with a positive outlook on life and others with a negative or depressed view of life.

Second, happiness is partly conditioned by the religious and cultural character of the country. Having a positive outlook on life may have something to do with whether the person is Catholic, Protestant, Jewish, Hindu, Muslim, or some other religion. A person’s outlook may also depend on whether finding a job and earning a living in a particular society is generally hard or easy.

As a U.S. family’s income approaches $75,000, the family’s happiness increases. They are less worried about having enough income to acquire sufficient food, clothing, and shelter. As incomes rise above $75,000, however, the likely level of happiness is no longer correlated with income. A millionaire may be unhappy because he wants to reach a much higher level of income. A billionaire may be unhappy because he needs to spend a lot of time managing his money and making sure he’s not being cheated by his assistants.

Assessing a person’s well-being rather than the person’s happiness puts the question on a more solid ground. Well-being is a function of having a sufficient level of food, clothing, and shelter; being healthy; being educated; and having a job and skills. Once the variables are specified, it is simpler to more objectively measure a person’s well-being.

We would expect that persons who have a high level of well-being would also show a high level of happiness. But there can be qualifications:

• Persons with a high level of well-being may be unhappy because they become jealous when comparing themselves with other people. Thorsten Veblen, the famous economist, talked about the pain of envying the social standing or conspicuous consumption of others.²
• Persons with a high level of well-being may be unhappy because they have not found a higher purpose in life or they haven’t developed certain skills they craved or certain relationships they sought.

The reason for making this distinction between well-being and happiness is that citizens have to decide what they think is the primary goal of economic development. Is it to create more and more goods and services? Is it to create a happy citizenry? Or is it to create a high level of well-being in the society?

Most economists prefer to avoid these choices and simply rely on measuring an economy’s performance by its rate of GDP growth. But here are the main problems of interpreting GDP growth as implying an improvement in people’s happiness or well-being:

1. GDP growth says nothing about how the benefits of higher growth are distributed. We can imagine high GDP growth with the poor becoming poorer and the rich becoming richer. Only if GDP growth consisted of income growth for everyone could we say that the benefit is well distributed.
2. GDP growth means that the marketed output of goods and services grew, but it doesn’t say anything about the quality of the output. Economist John Kenneth Galbraith noted that “an increased supply of educational services has a standing in the total not different in kind from an increased output of television receivers.”³ Growth in cigarette and alcohol consumption does not mean a growth in well-being, although it may sometimes mean a growth in temporary happiness. Growth in the amount of litigation taking place in society does not necessarily mean a net increase in the sum of happiness because one party’s gain is the other party’s loss. Growth in the amount of financial transactions may mean a lot of wealth is transferring over to property owners. Growth in the number of brands within a category doesn’t mean higher satisfaction if all the brands are essentially the same. Growth in the production and stockpiling of munitions normally does not improve anyone’s life and is similar to building pyramids. The point is that many GDP activities do not contribute to more happiness or well-being.
3. GDP growth ignores the costs that have been incurred with that growth. Consider that more GDP probably increases the level of air and water pollution and more traffic congestion. Consider that GDP growth could be the result of more people working longer hours and having less leisure time.

We must remember that an average says nothing about the distribution around the average. We would want to judge the economy’s performance by the level and trend of income inequality. If the wealthiest one percent of the U.S. population receives 28 percent of the U.S. national income, we can question whether this distribution is equitable.

We can judge an economy’s performance by examining the poverty level in a country. Today 15 percent of U.S. citizens fall below the U.S.- defined poverty level. A family of three (two parents and one child) in the United States would have to earn more than $19,530 to avoid falling into the poverty class. In Sweden, a much smaller percent of the Swedish population falls below the country’s defined poverty level. We would expect Swedish citizens to feel better off than U.S. citizens on the average.

GROSS NATIONAL HAPPINESS

In 1972, King Jigme Singye Wangchuck of the little nation of Bhutan proposed the need for a new measure called the Gross National Happiness (GNH) to be viewed alongside with the GDP measure.⁴ The GNH received a lot of publicity and today countries such as England, France, Denmark, Brazil, and others are engaged in developing a GNH measure.

King Wangchuck took the point of view that happiness occurs when material and spiritual development occur together and reinforce each other. He postulated four pillars of GNH: sustainable development, preservation and promotion of cultural values, conservation of the natural environment, and establishment of good governance. Several other investigators have offered further elaborations on Bhutan’s theory. In 2006, Med Jones, the president of the International Institute of Management, proposed tracking seven wellness areas:⁵

1. Economic Wellness: Indicated via direct survey and statistical measurement of economic metrics such as consumer debt, average income to consumer price index ratio, and income distribution
2. Environmental Wellness: Indicated via direct survey and statistical measurement of environmental metrics such as pollution, noise, and traffic
3. Physical Wellness: Indicated via statistical measurements of physical health metrics such as severe illnesses, being overweight, etc.
4. Mental Wellness: Indicated via direct survey and statistical measurement of mental health metrics such as usage of antidepressants and rise or decline of the number of psychotherapy patients
5. Workplace Wellness: Indicated via direct survey and statistical measurement of labor metrics such as jobless claims, job change, workplace complaints, and lawsuits
6. Social Wellness: Indicated via direct survey and statistical measurement of social metrics such as discrimination, safety, divorce rates, complaints of domestic conflicts, family lawsuits, public lawsuits, and crime rates
7. Political Wellness: Indicated via direct survey and statistical measurement of political metrics such as the quality of local democracy, individual freedom, and foreign conflicts

The most disappointing finding would be that as a nation’s GDP increased, its happiness decreased. This could happen if people had to work longer hours, if both parents had to work, and if there was less time available for family and leisure.

At some point, many people realize they’re in a “rat race” for higher income. They not only want to keep up with the Joneses, but even do better than them. They want a bigger home and a bigger car and further signs of success. They are kept going by envious comparisons with neighbors who do better and by the unceasing mass advertising power of huge companies that urge us to buy.

THE ROLE OF MATERIALISM IN RELATION TO HAPPINESS

Materialism is an orientation that is heavily promoted by economists and businesses. Materialism plays a major role in driving more consumer spending. We describe people as “materialistic” when they have a strong leaning toward acquiring and possessing material objects. We would not call a person “materialistic” who simply acquires basic food, clothing, and shelter. These are essential to living. However, if people spend a lot of time buying an unusual number of material objects, such as many dresses and pairs of shoes, we would label them as being materialistic. If they spend a lot of time searching and shopping for further goods even though their closets are full of everything they might need, we would say they have a materialistic addiction. If they are very conscious of their neighbors’ possessions and want to acquire the same or even better possessions, they are materialistic.

The English poet William Wordsworth captured the spirit of materialism in his sonnet: “The world is too much with us; late and soon, / Getting and spending, we lay waste our powers; / Little we see in Nature that is ours; / We have given our hearts away, a sordid boon!”

The story is told of Abd Al-Rahman III, a wealthy emir in the tenth century who reigned for fifty years and who had everything in the way of material comforts, fame, and riches. He was asked how happy he had been. He answered that he could only remember fourteen days when he had pure and genuine happiness! Psychologists who have studied happiness and unhappiness point to the following conclusion: People who rate materialistic goals like wealth (and fame and sex) “as top personal priorities are significantly likelier to be more anxious, more depressed and more frequent drug users, and even to have more physical ailments than those who set their sights on more intrinsic values.”⁶

Does this mean that materialistic consumers are typically unhappy? Not necessarily. A woman might wake up with the feeling that none of her wardrobe items fit anymore or are suitable for a forthcoming occasion, and she spends a whole day shopping for a new dress. She started out unhappy, got involved in the search without thinking about whether she was happy or unhappy, bought a nice dress, and is now happy, at least for a while.

We saw earlier that measuring happiness is complicated. A person’s happiness can go up and down during the day. We need a measure of the more permanent state of a person’s “well-being,” “wellness,” “contentment,” or “life satisfaction.” We can measure a whole population or sub-sample. It would be a good sign if a nation’s reported level of “well-being,” “contentment,” or “life satisfaction” increased over time.

ACHIEVING HAPPINESS WITHOUT MATERIALISM

There are other styles of life than the materialistic that can give persons lifelong satisfaction. Among them are:

• Connecting deeply with art, culture, or religion
• Helping others and improving the world
• Deciding to live a simpler life with fewer possessions and needs

Let’s examine these three paths to higher-purpose satisfaction.

Connecting Deeply with Art, Culture, or Religion

The world is a better place because, in every society, there are some people who have a deep feeling for art, culture, or religion. A few of them will be artists such as Michelangelo or Leonardo de Vinci who want to create beautiful or arresting pieces of art. There are architects who want to create impressive physical structures for living, governing, or worshiping. There are composers such as Beethoven, Mozart, or Verdi who stir our feelings with their beautiful musical compositions. There are religious leaders who inspire us to feel more spiritual about life and the world and its meaning. All of these dedicated people help build what we call a civilization and a culture.

Many creative people would not be able to thrive if it weren’t for a much larger number of people who don’t make art but who enjoy it and want to support it. Without patrons and purchasers, the artists would not have the financial means to pursue a life of art. The art lover is as important as the art maker. A culture suffers when fewer people in a society have the means or wish to support the art makers.

Helping Others and Improving the World

Among the most admired people are those who exhibit and extend caring behavior toward others, including strangers. We praise Mother Teresa, Mahatma Gandhi, and Nelson Mandela, who dedicated their lives to improving the lives of others. We admire persons who show prosocial behavior—that is, voluntary behavior intended to benefit others by donating, sharing, helping, cooperating, and volunteering. They are the people who respond to natural disasters by pitching in to save or help others. And in smaller ways, their high level of empathy leads to generous giving wherever a real need exists.

Prosocial behavior is central to the well-being of social groups. Encouraging prosocial behavior in children and young adolescents benefits society. Discouraging antisocial behavior also benefits society.

Some small measure of egotism or self-interest might operate in prosocial behavior. The giver receives a feeling of self-worth from doing a good deed. The giving or caring person may expect some reciprocity under certain circumstances. None of this diminishes the positive value added to the lives of the others who have received the caring and help.

Living a Simpler Life

Another nonmaterialistic path is to simplify one’s life. Confucius said that a man would be admirable who lived in a mean, narrow street, with only a single bamboo dish to eat from, and did not allow his joy to be affected.

In Ancient Athens, the philosopher Epicurus held that the untroubled life is the source of happiness, and that the trouble of maintaining an extravagant lifestyle outweighs the pleasure of partaking in it.

There is a long history of famous people proposing a simpler life as the key to happiness. Among them are Gautama Buddha, John the Baptist, St. Francis of Assisi, Leo Tolstoy, Henry David Thoreau, Albert Schweitzer, and Mahatma Gandhi. Some religious groups, such as the Amish, Shakers, and Mennonites, have rejected pursuing wealth—or using technology.

One of the most influential thinkers on simplifying life was the economist E. F. Schumacher, who wrote Small Is Beautiful in 1973. Schumacher believed that the concentration of economists on output and technology was dehumanizing. He opposed the ideas that “bigness is better” and “growth is good.” People were more important to him and nature was priceless. He advocated sustainable development and became a hero of the environmental movement. He questioned the appropriateness of using GDP to measure human well-being. He thought that the aim of people should be to obtain the maximum of well-being with the minimum of consumption. He used the phrase “less is more.”

But seeking the simpler life is a direct attack on modern economics and modern marketing, which considers consumption and growth to be the sole end and purpose of economic activity. John Kenneth Galbraith saw the stockpiling of consumption goods to be the result of advertising and the “machinery for consumer-demand creation”⁷ rather than based on actual need.

Those advocating simple living urge people to reduce consumption and to drop out of the high consumption game. They call for a radical shift from growth to “degrowth.” By reducing consumption, people would reduce the time needed to earn money. They can then use this time for other interests, such as pursuing creative activities or helping others. By spending less, they can increase their savings, which can lead to financial independence and possibly earlier retirement. This type of thinking has spawned a number of “live simpler” movements:

• National Downshifting Week in the U.K. encourages people to live with less. The slogan: “Slow Down and Green Up.”
• The 100 Thing Challenge is a grassroots movement to whittle down possessions to a mere 100 items, with the aim of decluttering and simplifying people’s lives.
• The small house movement includes individuals who choose to live in small, mortgage-free, low-impact dwellings, such as log cabins or beach huts.

None of these campaigns have become mainstream movements. However, they do provide a platform for those who want to “drop out” from the “rat race.” They also suggest a key way to deal with the challenge of growing unemployment.

Being Mindful of Consumption

I’d like to quote my good friend Jagdish Sheth, a professor at Emory University, on the impact of marketing on our lives. “Marketing has often been accused of promoting overconsumption, thereby compounding the world’s economic, environmental, and social sustainability challenges,” he says. “There is widespread recognition of the need to adopt a customer-centric sustainability approach and educate consumers while also marketing products that avoid overconsumption and ease product disposal. Traditional cultures typically practice the waste-not-want-not philosophy, inculcated due to years of economic hardship. It is de rigueur to sell old newspapers, bottles, and metal items to a trash vendor, who then reuses or resells the items, for example, making paper bags out of newspapers. As these societies adopt Western norms such local traditions may be forgotten and need to be reignited.”⁸

HAPPINESS AND THE INEQUALITY OF INCOME

Although most people know about the exceedingly high incomes of famous movie stars, athletes, CEOs, and entrepreneurs, there doesn’t seem to be a mass outrage. The fact that the CEO of Boeing, James McNerney, took home $27.5 million in 2013 was noticed by Boeing workers only when the company insisted on cutting the pensions of its employees rather than cutting the pay of top officials of the company. The fact that a super-rich person can earn in an hour what an average person earns in a year doesn’t lead to any mass protest movements.

In China, there are about 500 protests a day calling for more wages and/or better working conditions. It appears that in China, people are less unhappy about the inequality of income than about whether they have enough to live on. These people fail to see the connection between wealth concentration and their not having enough to live on. Their biggest grievance is with corrupt officials who grab land, charge fines, and demand bribes.

We don’t hear much about income redistribution as a solution to raising the incomes of average people. Most government legislators are beholden to the rich to raise the money they need for getting elected or reelected. Furthermore, they see the rich as driving the economy and conclude that breaking up concentrations of wealth would hurt investment in the economy or would cause the wealthy to flee from the economy. Little mention appears in the news media—also controlled by the rich—about the lavish incomes and expenditures of the super-rich. And there are always enough dreamers among the poor and working class who think that they too might get rich with a lottery ticket and live the life of Riley.

*   *   *

Redistribution has a role to play in maintaining a democratic society. The American and French revolutions were driven by the idea of creating a Society of Equals, where all citizens shared universal political and economic rights. It is a way to improve the participation of more citizens in the benefits of capitalism and democracy and to prevent the slide toward growing inequality that can lead to protests, crises, and further revolution instead of evolution.⁹

Here I summarize my thoughts about what is a feasible view about the constituents of a healthy capitalism:

• The aim of a capitalistic society should be to create an economic system whose operation leads to a broad level of happiness and well-being in its citizens.
• The task of a capitalist economy is to use its resources to permit all people to realize their potential and to obtain the basic necessities of life. The goal is to eliminate poverty.
• The job of marketing in a capitalist economy is to create a healthy desire in its citizens for the acquisition of material goods beyond the basics of food, clothing, and shelter. This might be called the American Dream.
• As a result of the public wishing to acquire more goods, people will work hard. Their jobs will produce a livable income that they
• can spend freely to acquire the goods that they desire. And a responsible credit system allows them to acquire even more goods than they can afford with their current income within limits.
• As households earn an adequate income, their well-being increases. Beyond that level, a variety of factors will affect their level of happiness.
• Capitalism develops high-quality and luxury products to encourage its citizens to work hard to attain a “good life.” The affluent middle class keeps the economy going.
• The hope is that the rich and super-rich take on more social responsibility to share their good fortune with those who are less fortunate.