Over the weekend I read Diane Coyle’s The Economics of Enough. I particularly enjoyed her dismantling of the concept that to increase happiness we should forget about growth. My reading list on this area has increased considerably - and it seems that I should place Amartya Sen high on that list. Coyle writes:
Those researchers like Richard Layard and Robert Frank who believe the link between growth and happiness tails off to nothing above a certain income level argue for taxes to make people stop working so hard or spend less on various consumer goods. The government must prod us into being happy because we’re simply adapting to each new level of income. The rat race means that like caged guinea pigs scrabbling around their wheel, we keep running to earn and spend more without making any progress in terms of happiness.
However, this kind of policy conclusion has been strongly challenged by other researchers. In his book The Idea of Justice Amartya Sen agrees that people’s happiness depends on their expectations, which are shaped by their own social situation. But he turns the argument about adaptation and the hedonic treadmill back on the happiness crowd: if we just aim for people to be happy with their lot, where is the social discontent that will create the momentum for a better life? Would women have ever gained the vote if many had not been unhappy? Would there have been a civil rights movement without discontent? Is poverty acceptable because poor people say they are pretty content? Obviously not; most people would agree the world with the discontent and change was better than the contented and static one.
As noted in my recent post on happiness adjusting, dissatisfaction might be a major driver of progress. However, there is a distinction between the policy concerns of Frank and Sen. Frank intends his taxes to cut competition in areas where the effort is wasteful and focused on relative status, such as competition for the largest house. Further, he intends progressive consumption taxes to allow reduction of taxes in other areas, such as those on income. That is a large step from taxing the poor because they will not be happier when richer.