The case against happiness-based economics

Max Borders Editor, The Freeman
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It is the greatest good to the greatest number of people which is the measure of right and wrong.
— Jeremy Bentham

The bones of philosopher Jeremy Bentham may be locked in a case at University College London, but Bentham’s ghost is flying around universities and government buildings, animating nice people. These otherwise intelligent folks are engaging in so-called “happiness economics.” And that should make us a little unhappy, for reasons I’ll explain.

Jeremy Bentham is the fellow who, in the 1700s, set out the philosophy of “utilitarianism.” That’s the moral theory that basically says the “good” or the “moral” is whatever action or policy contributes to the greatest total happiness in society. Bentham thought you could devise a “hedonic calculus” — a measure of aggregate happiness. It’s no accident that some forms of welfare economics grew out of his idea. In fact, some consider Bentham to be a founder of modern economic science. But be warned: utilitarianism is a bankrupt idea.

The main problems of utilitarianism are:

  • It’s impossible to measure happiness or well-being (despite lots of questionnaires);
  • Happiness is fundamentally personal — that is, subjective;
  • Attempting to aggregate happiness means thinking of “society” as having happiness;
  • Policies derived from the latter bullet ignore individual rights;
  • It opens doors to those who claim to know how to make “society” happier, given power;
  • Proponents usually jump to conclude that wealth redistribution satisfies the utility principle, whether or not the methodology works.
  • And there are more.

The extent to which an alternative strain of utilitarianism can address these problems is the extent to which it is a tortured strain. But happiness research and “happynomics” is pretty much just mainstream utilitarianism wrapped up in surveys and questionnaires. That’s why we should be suspicious from the start.

Utilitarianism warmed over

Take Kentaro Toyama’s recent pitch for happynomics in The Atlantic. In “The case for happiness-based economics,” Toyama concludes:

Building a public policy on the foundation of happiness research would be controversial, to say the least. Critics, especially on the right, might accuse Washington of using wishy-washy assumptions about money and happiness to guide our tax and welfare policy. To be sure, causal relationships between income and happiness are still not established, and we care about values beyond income equality. But, focusing on the logarithm of income might make us pay a little more attention to that third pursuit Thomas Jefferson hailed in the Declaration of Independence.

Before doing anything else, we ought to defend Thomas Jefferson. The whole point of that “third pursuit” (the pursuit of happiness) is that it is a right to pursue, not to an outcome. Welfare economics and so-called “happiness-based” policies are, by their very natures, ambivalent with respect to pursuits. In fact, the whole point of utilitarianism is that it is concerned with consequences — e.g., the measure of happiness at some slice in time.

Similarly, redistributing wealth is about the goal of reduced income equality. Jefferson meant something very different when he wrote the Declaration. In other words, Jefferson wasn’t concerned about whether or not you became happy — or rich — but that you had the freedom to pursue happiness your own way. Diverse means and diverse ends. I don’t know which is more troubling: confusion about the term “pursuit of happiness” or conflation of the phrase “all men are created equal” with worries about income equality. But I digress.


Utilitarians like Toyama rarely bother to ask the eudaimonaic questions, such as: Would one be happier working towards income or being the passive recipient of it? Is there any dignity on the dole? What about having wealth makes people happy — having it, earning it or both?
Don’t be afraid of the fancy Greek work. Aristotle described a form of happiness that comes from living a purposeful, contemplative life. Happiness researchers would do well to look back at his work, as well as the positive psychology of Mihaly Csikszentmihalyi, who has modernized the idea of happiness in doing.

If you think I’m being unfair to Toyama, consider this passage:

[Recent happiness research] also emphasizes something that most economists are less eager to discuss. Central to Stevenson and Wolfers’s analysis is the use of a logarithmic scale to relate happiness to income. What correlates with a fixed increment of happiness is not a dollar increase in absolute income (e.g., an additional $1000), but a percentage increment (e.g., an additional 100%). So, going from a $5000 annual income to $50,000 links with as much additional happiness as going from $50K to $500K, or from $500K to $5 million, or even from $5 million to $50 million.

What does a “logarithmic scale” have to tell us about the happiness of an individual living a purposeful life? About the joy of making one’s own way? About individual incentives, or those incentives created by institutions? About the trade-offs we have to make to increase well-being when living among family and neighbors making similar trade-offs? The truth is, a logarithmic scale tells us nothing meaningful about these questions. And neither does the research to which Toyama appeals. It is the granularity of context that will forever elude happiness researchers, but in which answers about happiness can be found.

But here’s the passage that really betrays Toyama’s Benthamite bent:

Still, if policy makers were serious about utility, they could take the logarithm of personal wealth and sum over all citizens for an estimate of national welfare. Though this would overlook other components of well-being, it would immediately focus more attention on income inequality: Ten people each earning $100,000 would have much greater total happiness than nine people earning $10,000 and one person with $910,000, even though each group earns the same $1 million.

And that is Toyama’s punch line: happiness is wealth redistribution. How does he know these folks would be happier? What does he mean by “earn”? And does he consider that stewardship might be an important factor in maintaining wealth, as these kinds of lottery stories suggest? A connection between assets and happiness can’t be made simply by juxtaposing them. Again, the circumstances of your wealth are key factors in explaining happiness.

Utilitarians are far too busy deriving correlations from statistical abstractions. It appears they’re also too busy worrying what group has what assets and trying to connect that with something that is fundamentally personal. But oversimplifying things this way, happiness researchers are able to use the so-called “gap” between rich and poor as an instrument with which to beat up the rich. The trouble is, the rich are usually productive. And productivity is a key determinant of growth — which increases well-being on a number of dimensions. If you tax productivity and reward less work, you’re likely to get what you pay for. No matter. Circumstances of time and place are irrelevant to these utilitarians. And the unintended consequences seem to be lost on them.

Salary and happiness

Toyama finds an “ah ha” moment in studies of income:

To put it another way, as income rises, every additional dollar represents a smaller increment of happiness. At one level, this is perfectly obvious. The first increase of $45K — from $5K to $50K — would take a family from hunger and homelessness to being well-fed in an apartment, probably with a TV to boot. An additional $45K of income to $95K might allow for a few luxuries, but certainly nothing close to the difference between starvation and the middle class!

Fine. It’s probably easier to be happy if you can afford to eat and have a roof. And this intuition resonates with affluent readers of The Atlantic who imagine how unhappy they’d be suddenly making $17K per year. So we really didn’t need a logarithmic scale to prove that intuition (though it’s not clear there aren’t meaningful counterexamples).

Still, perhaps we can also agree that income above $45K may only make us marginally happier compared with going from starving to middle class. Most people have a lower bound and upper bound for happiness that’s considered a natural range, which has to do with levels of neurotransmitter. This is an insight of cognitive science more than economics. Indeed, if leaders really wanted to be utilitarian, they might just put Prozac in the water and not worry about inequality. But we recoil at that thought because we know that — at some level — our emotions connect with our unique relationship to our individual circumstances. And, I dare say, our pursuits.

So the fundamental point is, even if someone really does become happier when they go from, say, $50,000 to $500,000 — and that happiness is sustained over one’s lifetime (doubtful) — that tells us little about why they became happier. In other words, it’s quite possible these individuals became happier because of their journey, not just their destination.

Did someone in the cluster of people filling out Stevenson and Wolfer’s bubble sheets leave a boring desk job to work on a successful business? Did one go back to college to learn a trade that paid more and made them more fulfilled? Is someone finding a sense of purpose in the work that yields more income? Did they find joy in the opportunity to give away much of the wealth they acquired? Or did they simply win the lottery? Again: why are these people happier? Correction: why is each individual happier? The wonks can’t tell us because the “causal relationships between income and happiness are still not established.” And they never will be.

Finally, income’s diminishing marginal utility has nothing to tell us about the mechanisms by which people might most effectively and sustainably get from $0 to $45K. That is, there are functional aspects of wealth creation and upward mobility that have little to do with happiness per se. But these functional aspects have a lot to do with why redistributionist policies fail. For example, welfare economists have been running foreign aid efforts in Africa for more than fifty years. It’s not clear that it’s done very much good. Some would argue it’s done a lot of harm. But the harm has come not just to the well-being of Africans, but to the institutions that would improve well-being.

The bird’s eye view of happiness

Roger Cohen, writing from London in the New York Times, tells us:

I was thinking about some recent moments of happiness in my own life. One came walking across Regent’s Park, my skin tingling at the first brush of spring. Another came kissing my daughter goodnight as she slept and seeing how peaceful she was.

Cohen was also writing in defense of “happynomics” and of Prime Minister Cameron’s proposal for a British “happiness index.” But Cohen’s examples illustrate just how far away from government policy happiness really is.

Far from being a humane way of understanding people, happiness economics is a way of lobotomizing them. When people become abstractions, it becomes easier to be a utilitarian. It thus becomes easier to justify the redistribution scheme du jour. As one takes on the bird’s eye view, the faces become fuzzy. Each person becomes devoid of identity, perspective, circumstances, or, indeed, of his or her own story.

What makes me human is my perspective, my life and my pursuit of happiness. Imagine policymakers trying to measure and develop policies to enhance spiritual awareness or religiosity. Luckily we have constitutional limitations on this sort of thing. But the idea should strike us as absurd, even if we’re not all that religious.

More to the point: who is better equipped to find happiness: you or the government? I know what my answer is. And it is in this spirit that Jefferson would have agreed with the most famous utilitarian of all, who said:

[L]et not society pretend that it needs, besides all this, the power to issue commands and enforce obedience in the personal concerns of individuals, in which, on all principles of justice and policy, the decision ought to rest with those who are to abide the consequences. Nor is there anything which tends more to discredit and frustrate the better means of influencing conduct, than a resort to the worse. If there be among those whom it is attempted to coerce into prudence or temperance, any of the material of which vigorous and independent characters are made, they will infallibly rebel against the yoke.

John Stuart Mill realized that there are a great many people for whom freedom and dignity are more important than someone else’s notion of happiness or the good. Put another way, freedom and dignity are features of happiness not easily captured on pseudo-scientific questionnaires. There is just no such thing as a hedonic calculus. (Sorry, Bentham.) There is just no way to get “beyond” freedom and dignity. (Sorry, Skinner.) And there is no way to fuse the ideas of Skinner and Bentham to make anything practicable. (Sorry, Toyama.)

Liberty upsets patterns

The happiness economists are the new, would-be philosopher-kings. And they’ll use this so-called “research” to justify all manner of intrusions into people’s lives. But as the late philosopher Robert Nozick said: “Liberty upsets patterns.” That is why we should not only be skeptical of happiness researchers’ ability to measure aggregate happiness, but that they can craft policies based on such metrics. We should be suspicious about those same researchers’ suggestion that happiness is something that can be redistributed from on high using points collected on a scatter plot. You and I, after all, are not plot-points.

Max Borders is a writer and consultant living in Austin. He blogs at Ideas Matter.