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  • and the Pursuit of Happiness

  • and the Pursuit of HappinessWellbeing and the Role of Government

    E D I T E D B Y P H I L I P B O O T H

    The Institute of Economic Affairs

  • First published in Great Britain in 2012 byThe Institute of Economic Affairs

    2 Lord North StreetWestminster

    London sw1p 3lbin association with Profile Books Ltd

    The mission of the Institute of Economic Affairs is to improve public understanding of the fundamental institutions of a free society, with particular

    reference to the role of markets in solving economic and social problems.

    Copyright The Institute of Economic Affairs 2012

    The moral right of the authors has been asserted.

    All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic,

    mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the publisher of this book.

    A CIP catalogue record for this book is available from the British Library.

    ISBN 978 0 255 36656 4

    Many IEA publications are translated into languages other than English or are reprinted. Permission to translate or to reprint should be sought from the

    Director General at the address above.

    Typeset in Stone by MacGuru Ltdinfo@macguru.org.uk

    Printed and bound in Britain by Hobbs the Printers

    The authors 9Foreword 14Summary 18List of figures and tables 21

    1 Introduction 25Philip BoothPoliticians in a muddle 25GDP or GWB? 27Happiness and government intervention 30Made happy by government or free to pursue happiness? 31

    PART ONE: GDP OR GWB?

    2 The folly of wellbeing in public policy 39Paul OrmerodIntroduction 39The GDP straw man 40Wellbeing and measures of economic and social

    progress 44Inherent weaknesses in happiness measures 48

    cONTENTs

    5

    http://www.iea.org.uk/http://www.iea.org.uk/http://www.iea.org.uk/http://www.iea.org.uk/

  • The relationship between happiness and income revisited 50

    Controlling economic and social life to promote happiness 52

    Conclusion 55References 57

    3 subjective wellbeing, income, economic development and growth 59Daniel W. Sacks, Betsey Stevenson and Justin WolfersIntroduction 59Main findings 61Background on subjective wellbeing 62Within-country estimates of the satisfactionincome

    gradient 65International comparisons of satisfaction and income 70Satisfaction and economic growth 76Alternative measures of subjective wellbeing 84Conclusions 88References 90Annexe 94

    4 Are more equal countries happier? 98Christopher SnowdonHappiness is flatlining 98The non-relationship between happiness and equality 100The academic literature on happiness and inequality 104Happiness and relative income 108Can we deal with income envy anyway? 111Attitudes to inequality 113References 122

    PART TWO: HAPPINEss AND GOVERNMENT INTERVENTION

    5 Wellbeing at work: any lessons? 131J. R. ShackletonObjective and subjective measures of wellbeing at work 132Compensating differentials 138Is there a business case for employer intervention to

    improve wellbeing? 142Public policy and international comparisons 145Conclusions 152References 155

    6 Wellbeing and the size of government 160Christian BjrnskovIntroduction 160Government ability and incentives 162Main determinants of national happiness 165Government redistribution 172Conclusions 173References 175

    PART THREE: MADE HAPPY BY GOVERNMENT OR FREE TO PURsUE HAPPINEss?

    7 The unbearable lightness of happiness policy 181Marc De VosThe political rediscovery of happiness 181Measuring happiness measurement 184

  • 9

    A shallow form of happiness 191Happiness, freedom or justice? 196Poor but happy? 198Conclusion 198References 200

    8 Lessons from Austrian and public choice economics for the happiness debate 205Peter J. Boettke and Christopher J. CoyneIntroduction 205Conceptual issues 208Practical issues 212Negative unintended consequences 215Concluding remarks 219References 220

    9 Happiness is not within the governments remit: the philosophical flaw in happiness economics 222Pedro SchwartzLayards utilitarianism 223An overriding aim for public policy? 225Happiness as a public good 231The justice of the market 237References 244

    About the IEA 246

    ABOUT THE AUTHORs

    christian Bjrnskov

    Christian Bjrnskov is associate professor of economics at Aarhus University in Denmark. He studied economics at Aarhus and obtained a PhD at the Aarhus School of Business in 2005. His research interests include political economy, institutional economics and happiness studies. Christian is on the edito-rial board of Public Choice and the European Journal of Political Economy and is affiliated with the Centre for Political Studies in Copenhagen. His research has appeared in a wide range of journals, such as the Journal of Development Economics, the Journal of Law and Economics, Public Choice and the Journal of Happiness Studies. More details are available at http://pure.au.dk/portal/da/chbj@asb.dk.

    Peter Boettke

    Peter Boettke is a university professor of economics at George Mason University (GMU) and the BB&T Professor for the Study of Capitalism at the Mercatus Center at GMU. He is also the editor-in-chief of the Review of Austrian Economics. Petes personal web page is http://econfaculty.gmu.edu/pboettke/.

    http://pure.au.dk/portal/da/chbj@asb.dkhttp://pure.au.dk/portal/da/chbj@asb.dkhttp://econfaculty.gmu.edu/pboettke

  • a b o u t t h e a u t h o r s a n d t h e p u r s u i t o f h a p p i n e s s

    10 11

    Paul Ormerod

    Paul Ormerod is the author of three best-selling books on economics: The Death of Economics, Butterfly Economics and Why Most Things Fail, a Business Week US Business Book of the Year. He read economics at Cambridge and obtained an MPhil in economics at Oxford, and in 2009 was awarded a DSc honoris causa by the University of Durham for the distinction of his contributions to economics. Paul is a consultant but retains close academic links and publishes in a wide range of journals, such as Proceedings of the Royal Society (Biology), Physica A, Mind and Society and the Journal of Economic Interaction and Co-ordination. More details are available at www.paulormerod.com.

    Daniel sacks

    Daniel Sacks is a doctoral student in the Applied Economics Program at the Wharton School of the University of Pennsyl-vania. His research is supported by a National Science Foundation Graduate Research Fellowship.

    Pedro schwartz

    Pedro Schwartz is Professor Extraordinary of Economics at San Pablo University in Madrid. His knowledge of utilitarianism and happiness economics comes from work for a PhD thesis on The New Political Economy of John Stuart Mill at the LSE, as well as his time at the Bentham Project. He writes on questions of political philosophy from an economic point of view and is preparing an English translation of his book In Search of Montesquieu. For the IEA he wrote The Euro as Politics (2004).

    Philip Booth

    Philip Booth is Editorial and Programme Director of the Institute of Economic Affairs and Professor of Insurance and Risk Manage-ment at Cass Business School, City University. He has written extensively on regulation, social insurance and Catholic social teaching. He is a Fellow of the Institute of Actuaries and of the Royal Statistical Society and associate editor of Actuarial Annals and the British Actuarial Journal. He has also advised the Bank of England on financial stability issues (19982002) and has been a visiting Fellow at Blackfriars Hall, Oxford University (2010/11).

    christopher coyne

    Christopher Coyne is the F. A. Harper Professor of Economics at the Mercatus Center at George Mason University. He is also the North American editor of the Review of Austrian Economics. Chriss personal web page is www.ccoyne.com.

    Marc De Vos

    Marc De Vos is a professor at the Ghent University law school and the general director of the Itinera Institute, a non-partisan policy think tank based in Brussels. He frequently publishes, lectures and debates on issues of European integration, globalisation, labour market reform, pensions, ageing, healthcare and the welfare state. He has authored and co-authored numerous books and articles. His most recent book is After the Meltdown: The Future of Capit-alism and Globalization in the Age of the Twin Crises (Shoehorn, 2010).

    www.paulormerod.comwww.ccoyne.com

  • a b o u t t h e a u t h o r s a n d t h e p u r s u i t o f h a p p i n e s s

    12 13

    Munich. She has published many articles that have appeared in journals such as Contemporary Economic Policy, the Quarterly Journal of Economics and the Journal of Labor Economics.

    Justin Wolfers

    Justin Wolfers is an associate professor of business and public policy at Wharton University of Pennsylvania. He attended Harvard University from 1997 to 2001 and has a PhD and an AM in economics. Justins research interests include law and economics, labour economics, social policy, political economy, behavioural economics and macroeconomics. He is a research associate for the National Bureau for Economic Research and is currently affiliated with the Center for the Study of Poverty and Inequality, Kiel Institute for the World Economy and the Brook-ings Institution. Justin has published articles in journals such as Contemporary Economic Policy, the Quarterly Journal of Economics and the American Economic Journal: Economic Policy. He has also published research for the World Bank.

    J. R. shackleton

    J. R. Shackleton is Professor