The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [18]
The weight of opinion seems to be tipping firmly toward the dashboard approach, introducing a range of supplementary indicators in addition to GDP.24 Many national statistical offices now produce “satellite accounts,” usually looking at environmental measures, and more are also producing other types of measures such as time-use surveys looking at unpaid work at home. By far the most practical and informative approach is to monitor several indicators in addition to GDP, rather than trying to find a single number to replace GDP. One government already does this. The Australian Bureau of Statistics each year publishes a wide array of indicators selected in consultation with the public. The Measuring Australia’s Progress (MAP) indicators fall into four categories: individuals, the economy, the environment, and living together. The MAP summary depicts the average annual rate of change of the indictors in these categories over a period of ten years.25
THE ANTIGROWTH ALTERNATIVE
Criticizing the indicator being measured is one approach; an alternative is to reject the use of any growth indicator at all, preferring to focus on happiness. The inspiration for this approach stems from an influential 1974 paper by economist Richard Easterlin presenting what has come to be known as the Easterlin Paradox.
He noted that levels of happiness were higher in richer than in poorer countries, and higher for rich than for poor people within a single country; but over a period of decades, GDP had risen much more than measured happiness. In fact beyond a certain threshold level of income, higher GDP didn’t seem to increase average happiness at all. Other economists followed up Easterlin’s paper and confirmed the finding. This body of work has come to create a sort of received wisdom about growth and happiness. These pieces of research find the same apparently conflicting evidence between cross-section samples of data (comparisons between countries or between people in one country at a point in time) and time-series samples (over time in one country). The conclusion typically drawn is that money does increase happiness but only up to a point. As Richard Layard put it in his well-known book Happiness: Lessons from a New Science: “Once a country has over $15,000 per head, its level of happiness appears to be independent of its income per head.”26
There are two explanations given for this paradoxical result. One is that people usually adapt to changes in their circumstances to become pretty much just as happy as they were; this is true of certain positive events such as winning a lot of money and of some negative ones such as becoming badly disabled by an accident. A second and related explanation is that because people quickly get used to better circumstances, they need more and more income just to sustain their happiness—it’s called the “hedonic treadmill.”27 Richard Layard writes: “I grew up without central heating. It was fine. Sometimes I had to huddle over a fire or put my feet into a bowl of hot water, but my mood was good. When I was forty, I got central heating. Now I would feel really miserable if I had to fight the cold as I once did. In fact, I have become addicted to central heating.”28 Together, adaptation and the hedonic treadmill seem good explanations of why at any point in time rich people are happier than poor people, yet over time higher incomes don’t raise happiness. Some of the happiness authors have concluded that government policy should stop seeking to achieve economic growth, as it doesn’t make people any happier. This is sometimes linked to the finding from psychological research that