you're both wrong

In the issue of Maclean’s coming out today, you might come across Steve Maich’s piece about how we told you so — money does buy happiness. What Steve will be telling you about is new research that purports to undermine the “Easterlin paradox”, the phenomenon whereby after a certain level of GDP — usually around $10k per capita — aggregate happiness stops rising.

The most commonly accepted explanation for the paradox is that absolute income matters in poor countries, because what most people lack are basic necessities like decent food and shelter and simple amenities such as indoor plumbing, central heating, and household appliances. In short, just no longer being cold, wet, and hungry tends to make people considerably happier.

In a more affluent economy though, what supposedly matters is status, and what determines status is your relative income — that is, how you compare to those you work with or who live near you. But this only means that people in an affluent society are engaged in a consumerist arms race or “aspiration treadmill,” which leads to the cycles of competitive consumption that lead to higher incomes at stagnant levels of happiness.

The paradox has fueled the aspirations of social engineers for the past thirty years. After all, if economic growth is not making us any happier, shouldn’t the state step in and do something to limit growth? One of the most popular policy suggestions is a steeply progressive tax on luxury consumer goods, which would serve as a sort of growth-limiting arms treaty. Politicians have also jumped on the happiness-not-growth bandwagon: Two summers ago, British Tory leader David Cameron gave a speech in which he advanced the original argument that “there’s more to life than money,” going on to suggest that what the government ought to focus on is not GDP but “GWB”, or general well-being.

But economists have been steadily chipping away at the Easterlin paradox, and the pendulum is now swinging back into pro-growth territory. The most recent attack comes in the form of a paper by two economists from the Brookings Institute that looked at new surveys and reinterpreted some old data. It found that not only is overall satisfaction substantially higher in the richest countries, but also that absolute wealth seems to matter more than was previously thought. Money, it concludes, does buy happiness.

Easterlin’s followers are not conceding defeat, because the standoff here is as much about politics as it is about economics. Lefties like the paradox, because the evidence that money isn’t making us happy supports an anti-growth political agenda and underwrites state intervention in the economy. Opponents of the paradox are keen on new research showing that growth does make us happy, because it serves a libertarian pro-growth agenda. But as is usually the case when it comes to interminable academic debates, both sides are working off a common mistaken assumption, which is that the point of either the government or the economy is to make people happy.

That is false. The government is not there to make you happy, nor is happinenss the point of economic growth. The state is there, first and foremost, to keep you safe. Meanwhile, the wealth generated by economic growth is not worthwhile in itself. Money is just the heat thrown off by the engine of innovation, and what is valuable about innovation is not that it makes people happy, but that it serves as a sort of social immune system. Just as your body’s immune system is constantly generating new shapes of antibodies to meet any potential threat, a growing economy uses the process of creative destruction to generate a constant stream of innovation in the form of new products, new technologies, and better ways of manipulating our bodies and our environment. The more innovation we have, the more flexible and effective we can be in response to challenges like disease, military threats, and environmental catastrophe.

So — what’s the secret to happiness? Turns out it isn’t money, it isn’t fame and glory, or friends and family, or hard work and moral rectitude, or any of the countless other prescriptions for achieving the good life that have been mooted over the centuries. No, if you really want to become happy, all you have to do is get old.

According to a new study out of the University of Chicago, the happiest Americans are the oldest. At 88, fully one third of respondents reported that they were very happy, while only 24 percent of people in their early twenties could say the same. Overall, the odds of being happy increased five percent with every ten years of age. According to the study’s author, sociologist Yang Yang, older people might have more aches and pains, but they’ve also learned to happy with what they have.

This is not exactly a pleasant thought — happiness is just another word for nothing left to live for — but perhaps some good might come of it. If we’re lucky, this new research will finally derail one of the more pointless economic debates of the past thirty years, over the supposed link between wealth and happiness.

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