[Graeme]

The economics of happiness can make for sad reading

$this->bbcode_second_pass_quote('', 'Y')ou have a job. You live in a small town in New Jersey, New South Wales or West Sussex. You are neither poor nor rich. You haven’t had a real pay rise in the past five years. For the first time in your life, your standard of living has been falling. So how happy do you feel?

This is not as daft a question as it might appear. The conventional wisdom is that people expect to become better off year after year. What’s more, they punish governments that make them worse off. Elections are won and lost on this bread-and-butter issue.

The notion that rising incomes makes people happier was challenged in the years leading up to the financial crisis. There were studies showing that above a relatively modest level an extra dollar, pound or euro of extra income did not bring any increase in well-being.

This finding mattered for two reasons. Firstly, it was a direct challenge to the economic orthodoxy of the past two and a half centuries, which has been based on a simple equation: more equals better. Secondly, it fed into a wider debate about global warming. The argument was that “more is better” economics was a threat to the existence of human life on Earth, so a different economics was needed.

The idea behind the new economics was that the whole gas-guzzling, consumer-bingeing, model had to be replaced or the planet would fry.



Academic studies have shown that there is a strong correlation between rising unemployment and unhappiness, with longer dole queues leading to higher levels of stress, more ill health and an increase in family breakdowns. This is hardly surprising: people get anxious when they lose their jobs and find it harder to make ends meet. The strong assumption has to be that the same will apply to a period when living standards are falling. People forced to forego the little pleasures in life just so that they can afford to heat their homes or stock the fridge are likely to be less happy than they were before.

Now put this in the context of climate change. Governments of developing countries say that their people deserve what the people in developed countries have got. They want electricity, roads, cars, labour-saving domestic appliances, foreign holidays and better medical care. One way this could happen is through a go-for-growth strategy using plentiful and cheap (in monetary terms) forms of fuel such as coal.

Another way it could happen would be for the west to develop a greener growth model that could then be exported to poorer countries. This would mean a rapid shift away from fossil fuels and support for the new – and thriving – environmental sector.

Green growth is an anathema to some in the environmental movement, who see it as an oxymoron. But the alternative is to tell people living in New Jersey, New South Wales and West Sussex that they are going to see their living standards fall but that they should not worry because they will be no less happy as a result. Best of luck with that.

[Graeme]

But perhaps we can have economic growth and no impact (or increasing) natural capital like Interface Inc is doing.

[ralfy]

Economic growth without using more resources can be done by increasing money supply, but eventually more money is spent on goods and services, which means more resources will have to be used.

[joyfulbozo]

Great thread Possum (y)