Psychologists have gleefully put several spanners into everything that economists hold dear. Most of all, practitioners of the dismal science have been left reeling with the revelation that while the UK economy has nearly doubled in size in the last thirty years, people are no happier (see figure 1). The research shows that after our basic needs are met, we adapt incredibly quickly to increases in material wealth, but we mistakenly think that more will make us happier.
So we could ask as an alternative – what would the well-being economy look like? Here are some of the highlights.
To start with, we would end our obsession with quantity of economic growth (which doesn’t make us any happier anyway). Instead we would focus upon creating quality growth that promotes prosperity without damaging social capital and the environment – which the economy is situated within and depends upon. We’d need new measures to know how we are doing on this. One approach to this is to adjust GDP (gross domestic product – the measure of growth) for environmental and social effects. nef’s new Measure of Domestic Progress does this, and we find that MDP has barely risen since the 1950s (see figure 2).
Once we let go of the shibboleth of maximising growth, many other aspects of the well-being economy can follow. We’d take more of our income gains in the form of that truly scarce resource – time. All the research shows that we tend to overestimate how much happiness more money will bring us. Therefore we work harder to get the extra income, and in the process crowd out the meaningful relationships with family and friends that are the biggest source of well-being in our lives.
We have more money but less time in which to enjoy it, and as a society need to switch back to having more time.
But it’s not easy to act as individuals on this because we don’t want to look work-shy, and because we want to keep up with the Joneses. So policy needs to facilitate this through better regulation of working hours, stronger personal leave provisions and exploration of a universal citizen’s income.
Simultaneously, well-being economics realises that work is not a ‘disutility’ like the standard economics textbooks say. Work can contribute greatly to happiness, perhaps more than consumption can, and the well-being economy would focus on creating enjoyable and satisfying work.
As well as an economics of time we need an economics of good work.
Unemployment is another target. It’s not simply about loss of income. The loss of identity, social relationships and meaningful activity is worse for well-being than the loss of income: in terms of the happiness effect, becoming unemployed is the equivalent of reducing income by £180,000 per annum. Research shows that unemployment even affects the well-being of those who are still employed by making them feel less secure. Happiness economics would target unemployment beyond what is economically efficient to what is optimal for well-being.
Finally, the well-being economy would be environmentally sustainable. Most social democrats I know (including me) say they care more about people than about trees. So I’ve taken to reframing environmental issues to mean ‘social justice for future generations’, which is somehow more motivating.
How do we guarantee this social justice? There are lots of ways, painstakingly discussed elsewhere. But the big shift for the economy has to be around tax. We presently tax goods (eg work) and don’t always tax bads. We need a far more thoughtful incentives system that uses tax to discourage waste, energy use and consumption, without hurting the poorest.
Would the well-being economy be a poorer place to live? The evidence is unclear as to whether our standard of living would be vastly affected: the productivity of happy economies tends to be high. But (and saying thisis to cross the line) even if this isn’t the case, we’d be far better off. Our present notions of prosperity are far too narrow.