The Economics of Happiness

Summing up each side is a disgrace to the argument but I will try to be succinct. In a nutshell, Justin Wolfers argument is that people in wealthier countries are consistently happier in almost every recordable way. They experience more love, less pain, more satisfaction, etc... Additionally, there is no cut off point of wealth beyond which someone is not happier. Robert Frank argues the same point, but disagrees mainly on more micro-focused data. Similar to quantum physics, where natural laws fall apart as smaller molecules are observed, happiness caused by economic growth falls short when measured within societies. His argument is not that the free market is bad or that money does not buy happiness, but that instead there are some inefficiencies which could be streamlined through incentives to unilaterally improve happiness.

I agree fully with Justin Wolfers. So fully that I feel I barely need to go into it. Literally, everything he said was rational, well-justified, and insightful. Let me move on instead to Mr. Frank, with whom I have a few quarrels. Firstly, using an animal parallel to explain the inefficiency of outcome in a free market is understandable, and provides a simple demonstration of the point he is making. But why does it have to be animals? For some reason, this was something that bothered me. It is an overly simplistic metaphor, which lacks any real supporting evidence and is instead only theoretically enticing.  Metaphors seem to always lose something in translation. In addition, his proposal of a "consumption tax" is unfathomable. Spending would be de-incentivized across the board, which would negatively impact the economy. Innovation would be stifled, since people would be less likely to take risks. Enjoyable activities would become victimized hallmarks of guilt and "wasted" income. Mr. Frank makes the mistake of assuming inherent value, a fundamental slip-up! It is essentially social communism. I wish I were lying. The benefits to society in terms of material gains, including better infrastructure, would be far outweighed by the loss of happiness. It is an astoundingly poor argument, almost to the point where I wonder if I am simply misunderstanding his argument. 

Questions:

1. How can we merge niches into one competitive field where the best of the best compete? Should we?

2. At what point will smaller problems such as higher stress and less sleep become destructive, even with net benefits across the board? For instance, even though we are getting happier overall, can smaller externalities such as stress eventually overpower the net benefit?

3. How can we identify and improve inefficiencies in the market?

4. Can we effectively steer markets?

Main Ideas:

1. Wealthier societies = Happier societies

2. People would rather be poor in a rich country than rich in a poor country. Absolute > Relative (according to Wolfers, who I personally agree with)

3. The Easterlin Paradox as an argument for ending economic growth is absolutely untrue.