The latest issue of Foreign Policy magazine has a series of short articles under the title The Next Big Thing: Why Bad Times Lead to Good Ideas.
Under the heading ‘Happiness’, Barry Schwartz offers us the cliches of the happiness research movement: that economists don’t know much about happiness, that we don’t know what’s good for us and pursue more work instead of more time with friends and family, and that GDP is ‘our principal yardstick of social welfare and social progress’.
From these propositions, Schwartz decides to advance this theory:
Financial necessity may give us the opportunity to discover that time spent with loved ones is much more satisfying than time spent with your 76-inch HDTV. Once the crisis lifts, we may not be tempted to go back to living the way we did before, if that’s even an option for those millions who are now losing their jobs, homes, and retirement accounts.
But it is more likely that the US recession will provide evidence against Schwartz’s theory.
While it is true that there are diminishing happiness returns to gaining more financial wealth, there is no evidence that having more wealth is, other things being equal, a negative. But there is evidence that an involuntary decline in wealth is a negative.
The latest HILDA report, which includes a question on life satisfaction (not quite the same as happiness, though there are strong correlations) shows that having experienced a major worsening in finances is one of the worst things for life satisfaction. By a large margin, these people are the least satisfied with their lives of all the respondents in the survey – even less satisfied than those who have gone to jail.
Among those who don’t experience major financial setbacks, recessions are bad for optimism about the future. People who are positive about their financial future tend to be happier than those who are not. Happiness is not just in having material goods, it is in anticipating material goods.
What is far more likely is that after a dip in the happiness statistics in 2008 and 2009, economic recovery will give Americans the opportunity to restore the missing material component of their well-being. Of course this is only one element of happiness – an obvious point, not an insight of subjective well-being research. But it is an element that Americans will want to again pursue.
Andrew Norton 
“after a dip in the happiness statistics in 2008 and 2009, economic recovery will give Americans the opportunity to restore the missing material component of their well-being”
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But if the material component of their well-being came from debt, because a hollowed out economy couldn’t provide a lot of people at the lower end of the scale with the means for a satisfactory life, how are they going to buy more stuff? It won’t be so easy to get credit.
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Tangentially related to this post is an op piece by Richard Eckersley in yesterday’s SMH – Developed, but don’t expect us to be happy about it (http://www.smh.com.au/opinion/developed-but-dont-expect-us-to-be-happy-about-it-20090612-c61p.html).
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Under the heading ‘Happiness’, Barry Schwartz offers us the cliches of the happiness research movement: that economists don’t know much about happiness … and that GDP is ‘our principal yardstick of social welfare and social progress’
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If I had a dollar for every time some soft-Left “intellectual” misrepresented economists and our use of GDP, I’d have enough to be able to cut down on my hours at work and spend more time with friends, thereby diminishing GDP but increasing personal and social* welfare, as we economists understand the concept!
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* Well, there is a slight problem that monetary income is taxed whereas psychic income isn’t, but that aside…
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I noticed a report somewhere in the press recently that more people have been playing golf on week days in Australia during the last few months. Less time spent working does not necessarily mean more time spent with loved ones (particularly if time spent watching TV doesn’t count).
You make a good point using the HILDA report. Research using the HILDA data base is making a big contribution to understanding of the impact of various life events on life satisfaction. Not only does a major worsening in finances e.g. bankruptcy have a substantial adverse effect in the short term, its effects also seem to be more durable than other adverse events such as being fired or made redundant.
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“But if the material component of their well-being came from debt, because a hollowed out economy couldn’t provide a lot of people at the lower end of the scale with the means for a satisfactory life, how are they going to buy more stuff?”
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Russell — how much money do you think you really need to buy all the consumer junk you want? It seems to me that, if you don’t have expensive habits like wanting to own fast cars, almost anyone on even a modest salary can afford almost everything these days, excluding housing. If I count up all the things in my house, for example, I doubt it would come to more than 60k, including my car. I’m sure almost any bank would be happy to give me a loan for that much.
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“excluding housing”. Conrad, how can you exclude housing? Andrew, like many economists, seems very optimistic about a recovery in the U.S. – sort of “things will soon be back to normal”. But allowing people who can’t afford housing to buy it, and encouraging people to invest the increased equity in their houses, at the height of a housing boom, in a speculative stock market, will surely not be repeated too soon. The minimum wage is the U.S. is not a livable wage, so what is this economic recovery going to be based on? Where will the ‘demand’ come from when the government stimulus runs out?
Andrew – the figures you cite all seem to be based on how individuals feel about what has happened to themselves as individuals. Would it be possible to have some decline in personal wealth, and maybe feel some anxiety about that, but benefit from living in a less unequal society, and feel better about that?
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Thanks to neoliberalism we live in an increasingly ‘private affluence, public squalor’ society. I just read Louis Nowra’s recent piece whinging about the lack of infrastructure in Sydney: it gets to people, despite their increasing personal wealth. They might be happier to be taxed more and have better public services.
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Another example – I’ll probably miss Four Corners tomorrow because like all ABC TV current affairs programs, it’s infotainment. But I doubt many people could read the coroner’s report on the death of Mr Ward which came out on Friday, and not cry – with shame, anger and pity. How can we be happy living in just about the richest place on earth, when something like that happens. I’m wealthier than I ever was, and deeply, deeply ashamed.
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Russell -They are taxed more and have better public services than in the past – but they are no happier. Public services are a more frustrating version of private services – people adapt to higher standards and expect greater improvements, which are always slow to come.
The Mr Ward case was a stuff-up, from what I can discern at this distance. No matter how rich we are, there will always be incompetence, stupidity, and cruelty.
On inequality and happiness, my views are still those in this post.
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Not sure that public services are better than in the past – for years I took the train to work and it was good, I sat down and read for half an hour. I stopped taking the train when I couldn’t sit down and was crushed in with my fellow citizens, and apparently it’s a lot worse now. I don’t recall that 30 years ago ambulances drove around for hours trying to unload patients at some hospital with an available bed. I could go on ….
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The Ward case is worse than that. The situation was known – everybody knew the vans had to be replaced, they were dangerous. The case went to cabinet and the money refused. At the time the Premier was obssessed with his billion dollar new sports stadium, the Minister for Indigenous Affairs was obssessed with her $500 million new museum, the transport minister was planning a tasteless $300 million river foreshore ‘development’ etc. The money, which almost could have come out of the petty cash, was refused because there’s no votes in indigenous affairs. Votes are all politicians are interested in. And the rest of us have let it be that way.
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I’d be the first to agree that many public services are deficient, but on basic indicators like health outcomes, levels of education, etc things are undoubtedly better than they were 30 years ago, and indeed better than they were 10 years ago.
In Melbourne, the trains particularly are much better than in the past (quieter, smoother, with air conditioning) but there is more over-crowding – though at least partly due to a surge in usage that I don’t think anybody could reasonably have predicted.
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Barry Schwartz is a good speaker – it’s worth looking up some of his talks on TED.
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“Conrad, how can you exclude housing? ”
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I was just pointing out the reason that many people got so indebted was not because of consumer goods, it was because of housing debt — something still encouraged by the government (first home owners grants, negative gearing, reduced capital gains, and silly planning restrictions). If easy credit ends, then presumably we will see house prices drop so people don’t need so much debt to begin with, like many other places in the world.
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Conrad, another key thing with housing debt is that it is linked to a somewhat fake value. Houses going up 20% in value doesn’t make them 20% better. Yes there is definitely some increase in value due to land scarcity, but then the increase is due to increased competition for a scare resources (inner-city dirt).
Having a big enough house (to fit all your possessions/family in), in a close enough suburb, seems to cost exactly as much money as you have. That’s because “big enough” and “close enough” for most people scale to be close to the maximum they can afford (or a bank offers).
I think Conrad is right in that the life improving consumer niceties (dish-washer, washing machine, TV) are much more affordable than they used to be. The problem is that new items have been added to the “real must have/want” list. Also low income is for a lot of people really low. Full-time minimum wage isn’t that much money once food, electricity, rent, etc.. are taken out. There’s a lot of people who aren’t even earning that much (they probably don’t read blogs like this).
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