Anagomezgarcia’s Weblog

This is a blog for my students at the Official Language School in Valencia

Cutting Edge Upper Intermediate Unit 2. Texts C and D October 20, 2014

Filed under: Uncategorized — anagomezgarcia @ 7:21 am
If we grow apart as we grow economically, researchers show in a landmark new study on happiness and inequality, we will never grow more happy.

Why haven’t Americans become happier over the past 50 years? Economists have trouble with that question. America’s average household wealth has doubled since 1962. We have become, as a nation, considerably richer. We should be much happier, too, at least according to conventional economic theory.

So what’s the problem? Three psychologists — Shigehiro Oishi and Selin Kesebir from the University of Virginia and Ed Diener from the University of Illinois — have an answer forthcoming in the prestigious journal Psychological Science.

We haven’t become happier, the three scholars show in their new study, because we’ve become more unequal.

Americans on average have rated themselves happier, over the past four decades, ‘at times of relative income equality.’

“Americans are happier,” as the three put it, “when national wealth is distributed more evenly than when it is distributed unevenly.”

Psychologists have examined links between inequality and unhappiness before, but not as rigorously in one society, over time, as Oishi, Kesebir, and Diener do in their new Psychological Science research.

Americans on average, the three researchers found, have rated themselves happier, over the past four decades, “at times of relative income equality.”

What explains this connection? They feel they’ve found that link — in people’s sense of trust and fairness.

Over recent decades, the General Social Survey data show, Americans on average have become less trusting and less convinced they live in a fair society. And this mistrust and sense of unfairness, the researchers discovered, matches up significantly with levels of inequality.

“Americans,” write Oishi, Kesebir, and Diener, “perceived others to be less fair and trustworthy in the years with greater income disparity.”

But not all Americans. The richest 20 percent of Americans show no linkage here. And more affluent Americans also do not show less happiness in those years when income inequality increases.

That finding makes eminent sense to Oishi, Kesebir, and Diener. Lower-income people, the three note, will understandably “perceive the world to be unfair if only the rich get richer,” and this “greater income disparity,” in turn, will “disjoint and divide” their communities, leaving lower-income people less trusting of others.

Couldn’t lower-income people be less happy simply because their household incomes are falling in years of growing inequality?

The researchers took the time to test this explanation with the General Social Survey data. They found no link. “Lowered levels of perceived fairness and trust,” not reduced income, turned out to be the factors “that made low-income Americans feel less happy in the years with greater income inequality.”

But the three analysts remain confident in their paper’s most basic insight. Only “income growth without income disparity,” they agree, will “result in an increase in the mean happiness of a general population.”


Happiness, equality and the search for economic growth

 Great inequality makes us hungrier for goods than we would otherwise be, by constantly reminding us that we have less than the next person.

The king of Bhutan wants to make us all happier. Governments, he says, should aim to maximise 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-emphasise 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?

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 1970s, 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 emphasised, we must sacrifice some growth today to ensure we don’t 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 wellbeing. So why continue to grow?

The groundwork for this question was laid some time ago. In 1974, the economist Robert 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.

That finding reinforced efforts to devise alternative indexes. In 1972, two economists, William Nordhaus and James Tobin, introduced a measure that they called “net economic welfare”, obtained by deducting from GNP “bad” outputs, like pollution, and adding non-market activities, like leisure. They showed that a society with more leisure and less work could have as much welfare as one with more work – and therefore more GNP – and less leisure..

But another finding has also started to influence the current debate on growth: poor people within a country are less happy than rich people. In other words, above a low level of sufficiency, people’s happiness levels are determined much less by their absolute income than by their income relative to some reference group. We constantly compare our lot with that of others, feeling either superior or inferior, whatever our income level; well-being depends more on how the fruits of growth are distributed than on their absolute amount.

Put another way, what matters for life satisfaction is the growth not of mean income but of median income – the income of the typical person. Consider a population of 10 people (say, a factory) in which the managing director earns $150,000 (£93,000) a year and the other nine, all workers, earn $10,000 each. The mean average of their incomes is $25,000, but 90% earn $10,000. With this kind of income distribution, it would be surprising if growth increased the typical person’s sense of well-being.

That is not an idle example. In rich societies over the last three decades, mean incomes have been rising steadily, but typical incomes have been stagnating or even falling. In other words, a minority – a very small minority in countries like the US and Britain – has captured most of the gains of growth. In such cases, it is not more growth that we want, but more equality.

More equality would not only produce the contentment that flows from more security and better health, but also the satisfaction that flows from having more leisure, more time with family and friends, more respect from one’s fellows, and more lifestyle choices. Great inequality makes us hungrier for goods than we would otherwise be, by constantly reminding us that we have less than the next person. We live in a pushy society with turbo-charged fathers and “tiger” mothers, constantly goading themselves and their children to “get ahead”.

The 19th-century philosopher John Stuart Mill had a more civilised view:

“I confess I am not charmed with the ideal of life held out by those who think … that the trampling, crushing, elbowing, and treading on each other’s heels, which form the existing type of social life, are the most desirable lot of human kind … The best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back, by the efforts of others to push themselves forward.”

That lesson has been lost on most economists today, but not on the king of Bhutan – or on the many people who have come to recognise the limits of quantifiable wealth.

Adapted from Project Syndicate, 2012.


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