Happiness is Good For Business

There is a movement afoot in economics that may revolutionize it's view of a good consumer and promises to fuel a change in paradygm, justifying taxing the rich to quell the excesses of greed. The new thinking sees the excesses of greed creates a disincentive to produce for the majority of the population. By balencing the economic playing field we not only nurture the American Dream, we recharge the motivation of increasing productivity and drive the growth engine within the economy.
Economist.com

Today, Lord Layard argues, unemployment is no longer Britain's biggest social problem. The number of jobless Britons claiming the dole is now about 960,000. But there are over 1m people receiving incapacity benefits because depression and stress have left them unfit to work.


Lord Layard's latest book has a much jauntier image on its cover: a “happy eccentric” with a fez on his head, a monocle in his eye and a bunch of flowers in his hand. A perky character, one might say. Ambitious, policy-minded economists such as Lord Layard are no longer satisfied with raising the rate of employment. They want to lift the rate of enjoyment too.


That, it turns out, is not easy. Happiness, as measured by national surveys, has hardly changed over 50 years. The rich are generally happier than the poor, but rich countries do not get happier as they get richer. The Japanese are much better off now than in 1950, but the proportion who say they are “very happy” has not budged. Americans too have remained much as Alexis de Tocqueville found them in the 19th century: “So many lucky men, restless in the midst of abundance.”


Lord Layard and Mr Frank both blame habit and rivalry for this stagnation of morale. People grow accustomed to what they have—however much of it there is. Moreover, having a lot of things is not enough if other people have more. A rising tide lifts all boats, but not all spirits.


For economists, this is radical stuff. They traditionally argue that people best serve themselves and the public by minding their own business. Indeed, this laissez-faire attitude is one reason Carlyle attacked them. Economics, he wrote, “reduces the duty of human governors to that of letting men alone”. He was afraid this radical idea would “dissever and destroy most existing institutions of society”.


But Lord Layard argues that we cannot help minding other people's business, as well as our own. Doing well is not enough: we also want to do better than our peers. This status anxiety runs deep in our nature, he says. Vervet monkeys at the top of their social tree enjoy more mates and bananas as a result, but they also exult in their position for its own sake. As with monkeys, so with mandarins. Top British civil servants tend to live longer than their underlings, regardless of other differences in lifestyle, according to the “Whitehall II” studies which have been monitoring thousands of Humphreys and Bernards since the 1980s.
Doing well is not enough: we also want to do better than our peers. This status anxiety runs deep


To clamber up the pecking order, some people slave away nights and weekends at the office. They gain in rank at the expense of their free time. But in making that sacrifice they also hurt anyone else who shares their aspirations: they too must give up their weekends to keep up. Mr Frank reckons that many people would like to work less, if only others slackened off also. But such bargains cannot be struck unilaterally. On the contrary, people compete in costly “arms races”, knowing that if they do not work harder, they will lose their standing to someone who does.


These races are motivated by more than just prestige. As Fred Hirsch argued in his 1977 book, “The Social Limits to Growth”, many good things in life are “positional”. You can enjoy them only if others don't. Sometimes, a quick car, fine suit or attractive house is not enough. One must have the fastest car, finest suit or priciest house.


Think of the scramble for schools, Mr Frank says. Only 10% of kids can go to the top 10% of schools. In many countries, wherever the schools are good, the houses will be expensive. Thus parents who want the best education for their child must overwork to afford a house in a good school district. In doing so, however, they raise the bar for everyone else.


Is mutual disarmament possible? Not without government help, Mr Frank and Lord Layard argue. The exchequer should tax earned income heavily enough to deter one-upmanship, they say.


Despite appearances, this is not a naked example of punitive redistribution—the fiscal politics of envy. Mr Frank and Lord Layard do not want to level the social order. Their aim is much more conservative than that. Their taxes would leave the pecking order intact and envy undiminished. But people would be deterred from acting on the green-eyed monster. The problem these economists want to tackle is not inequality per se. It is that people don't know their place and scramble vainly to improve it. Carlyle, who thought man should content himself with being the worthy follower of worthy superiors, would no doubt have approved.