• Choose a category
• All
• Classic-Fiction

By Root 1623 0

time, it is equally clear that GDP growth will not in itself give members of society an adequate sense of meaning or purpose. Policymakers need to aim for more than just GDP growth. Thus one conclusion is that we should look at a much wider array of indicators. The “dashboard” approaches I described should be given due prominence when politicians are assessing how they are doing, or when citizens and journalists are holding politicians to task. There has been a big international effort to build this consensus about statistics, including the work of the Sen and Stiglitz commission and the OECD; now governments need to implement it. The following chapters will be more specific about the kinds of indicators that should be included.

But I want to round out this first chapter by discussing, not whether we should care about whether people are happy (yes, of course), nor whether people’s happiness should be the overriding aim of policies (no, as argued above). Instead, I want to describe more carefully what it means to improve social welfare, where the standard approach of welfare economics has a lot to offer. Because, as argued earlier, neither happiness alone nor GDP alone is enough to define social welfare.

Economists typically use what is on the face of it a limited definition of welfare. A policy or change improves welfare if it improves the potential welfare of one person without diminishing that of anybody else—this is known in the jargon as a Pareto improvement. But although this seems oddly limited, what it means in practice is that economics defines welfare in terms of increasing people’s range of choices. A welfare improvement is something that expands the options of one person while reducing no others. This approach also makes it very clear that while there is no inherent conflict between wealth and happiness, welfare is inextricably tied to free choice. Welfare rests on freedom. Economics in this way is entirely consistent with the psychological evidence about the importance people place on freedom. It also means that social welfare incorporates in a straightforward way the value of a clean environment or a good life, in addition to income or wealth. A government seeking to maximize social welfare should not only maximize GDP growth.

Amartya Sen also makes a convincing case that our assessment of social justice should not rest only on the outcome—what is the happiness level—but also on how it comes about. Are the society’s institutions and its decision-making processes fair? Do people behave in a reasonable way? And in particular he emphasizes the importance of freedom, not only in the conventional political sense but also in the sense of people having the capability to choose and to lead the life they want.57 This resonates with the importance in the psychological research of a sense of control for reported happiness.

The second half of this book returns to some of these questions. First, the following chapters look at how we can reconcile more growth with our strong instinct that we have reached a point of “enough.”

Because to insist that GDP growth is desirable is not the same as believing that it is the only correct focus for improving society’s welfare. The next chapters turn to the ways in which economic growth is presently unsustainable.

One chapter picks up directly from the findings on inequality reported earlier in this chapter. Growth needs to deliver higher income for most citizens: the “average” person is a mythical creature, and if many people are getting no better off while only a few are growing vastly better off, happiness economywide will not improve. People everywhere have a strong sense of fairness, and although different countries will accept different degrees of inequality in income and wealth, in some cases inequality has become excessive.

What’s more, although economic growth is helping make us happier, and new technologies are helping boost growth, the social trends and rise in debt resulting from the fundamental structural changes under way in the economy are working in the opposite