The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [10]
The challenge to the central importance of growth as a policy goal dates back some years but has been strongly reinforced by the recent financial and economic crisis. This prompted many commentators—including many economists—to criticize the presumption that as long as real GDP (gross domestic product, the standard measure of the size of an economy) is growing, other things people might want will follow, including even ephemeral states of mind like happiness. The cause of anticonsumerism has become for some people either a moral campaign or—depending how cynical you are—a fashion. What’s more, the flaunting of wealth by the superrich has become politically charged now that so many taxpayers count the costs of recession. The recession has fed into a deep-rooted suspicion of conspicuous consumption.
That phrase was coined by the maverick economist Thorsten Veblen in his 1899 book The Theory of the Leisure Class. In many cultures, including my own Western cultural tradition, it’s a commonplace that money at best does not bring happiness and at worst causes great misery. As the Beatles put it: “I don’t care too much for money, for money can’t buy me love.” The King James Bible warns: “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.” King Midas bitterly regretted his golden touch and in Ovid’s telling: “Rich and unhappy, he tries to flee his riches, and hates what he wished for a moment ago. No abundance can relieve his famine: his throat is parched with burning thirst, and, justly, he is tortured by the hateful gold.”1 Economists themselves, drawing on research by psychologists, are now asking: Do the higher incomes created by economic growth make people happy? If not, what will increase people’s happiness, and what economic policies will help? Should economics continue to insist that governments should always aim to increase GDP growth?
There is a happiness bandwagon which says not. It’s widely taken as a fact by media commentators and many academics that GDP has gone up but happiness hasn’t increased. Consequently, some prominent economists and psychologists even advocate policies that trade off growth for happiness, including taxes on luxury goods to stop consumers indulging in wasteful spending.2 Their call for governments to force people out of the rat race has gathered quite a lot of support on the center-left of politics, enough to grab significant media attention although not always enough to win votes in elections. The underlying idea that economic growth does not increase happiness (at least in the rich West) has become increasingly commonplace.
This view has the additional attraction of making it seem much easier to reconcile concerns about the pressure of human activity on the natural environment with our own interests. If a halt to growth would make us happy as well as reducing greenhouse gas emissions, so much the easier for policymakers.
In this chapter, I will argue that unfortunately it is not so easy to escape the horns of this dilemma. The new conventional wisdom about happiness and growth is mistaken. Growth does make us happier, easily seen perhaps as the mirror of the unhappiness caused by economic recession. The policy challenge for governments is to deliver economic growth while ensuring it does not undermine other important goals, or indeed the health of the economy further into the future. Often this is described as “sustainability,” although that is a narrower concept than the Economics of Enough. Figuring out policies that can achieve a better balance between the present and the future is what the rest of this book is about. I draw on a long, if overlooked, tradition in economics, dating back to Frank Ramsey