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The happiness revolution: Why wealth is no longer the secret to life satisfaction

For a country’s well-being levels to grow, people’s fixation on economic performance needs to change to what is the most important outcome for most of us: our own happiness, says a celebrated UK economist. 

“A large income,” wrote Jane Austen, “is the best recipe for happiness …” By and large, economists have tended to agree. But it’s the income, not the happiness, that has been their subject of study, the means rather than the end. After all, happiness is a fleeting emotion, not something that can be analysed, quantified, modelled and predicted. Money, by contrast, is reliably mathematical.

That’s why the most important metric for a nation’s living standards has long been the value of its goods and services, what’s known as its gross domestic product (GDP). The modern understanding of GDP dates from 1934, when Russian-American economist Simon Kuznets introduced it to a US Congress report. Tellingly, Kuznets warned against taking GDP as a measure of welfare. It was a warning that went mostly unheeded, at least until very recently.

But in recent years the science of “happiness economics” has been steadily gaining attention and influence. Arguably, its most respected proponent is Richard Layard, programme director of the Centre for Economic Performance at the London School of Economics (LSE).

Layard is an intriguing character. The son of the distinguished British anthropologist and Jungian psychologist John Layard, he used to run his fingers over a bump on his father’s head when he was a child. Before he met Richard’s mother, his father explained, he was depressed and he placed a gun in his mouth and pulled the trigger. He somehow survived, though he had to have the bullet removed from his skull, leaving the scar that fascinated his young son.

Learning that your father had tried to kill himself might have troubled many other young boys, but Layard was more interested in his father’s work with his patients. From an early age, he nurtured a desire to help improve people’s lives. Having abandoned his plan to become a psychiatrist, he became a teacher and then an economist who was to be heavily influenced by the research on happiness done by the American Richard Easterlin in the 1970s.

Richard Layard. Photo/Alamy

Definition of a good society

Layard is now 85 and his mind is sharper and more active than those of most people half his age. Not only does he maintain his academic position at the LSE, but also he co-edits the World Happiness Report with Jeffrey Sachs and John Helliwell, as well as being a Labour member of the House of Lords under the title of Baron Layard. On top of all that, he has just published his latest book, Can We Be Happier? Evidence and Ethics.

The answer, as far as Layard is concerned, is a resounding yes. But before we get into the whys and wherefores of how to be happier, it’s worth asking a definitional question: what is happiness? John Lennon suggested, satirically, that it was a warm gun. I find that I rather enjoy sitting on a sun lounger with a glass of something cold and alcoholic in my hand while the Mediterranean laps invitingly at my feet. Yet, as much I’m fantasising about that scene while in the grey depths of a British winter, I’m not sure it’s the basis on which to run a functioning nation. Whatever happened to gritty determination and stoical endurance, those qualities that we typically associate with “success”.

Layard dismisses this belief that struggle itself is what makes sense of life, rather than the fruits of that struggle, as “Nietzschean philosophy”.

“I think that happiness is actually what people most care about,” he tells me in an effortlessly measured tone. “They want to know how happy their child is. They want to know whether they’re happy in their work, they want to know whether they’re happy in their marriages. We want everybody to be happier and that to my mind is the definition of a good society.”

Simon Kuznets accepts his Nobel Prize in Economics from Sweden’s Gustaf VI Adolf in 1971. Photo/Getty Images

Fair enough, but as it’s such a subjective concept, is it not ill-suited to objective comparative analysis? Layard says that this is a common misconception. On the contrary, it’s the very subjectivity of happiness that makes it so vital to measure. Happiness, he says, is not a binary state in which you’re either happy or unhappy, but a scale that runs from the depths of misery to the peaks of euphoria.

“How people feel,” he says, “is the deepest reality of their experience of life and it’s the way we should think about the quality of the person’s life – how they experience it, not as we think it might be.”

Naturally, everyone’s moods and circumstances fluctuate, but there is an underlying average that can be measured over time. Happiness research asks people to quantify their satisfaction with their lives on a scale of zero to 10. And from that it’s possible to build a robust picture of how happy or unhappy a given nation is at a certain point in history.

The data is relatively new, because there was very little demographic analysis of happiness before 1970, and plenty of countries didn’t begin conducting studies until much later. But from the information that has been collected, some interesting conclusions emerge. The first thing is that Austen was only partially right. By and large, very poor countries have low levels of happiness, but as you move up the GDP table, personal and national wealth become increasingly less significant.

Friedrich Nietzsche. Photo/Getty Images

Unemployment makes a big difference

It’s long been thought that wealth inequality was the cause of great dissatisfaction. However, although it remains an issue, according to the research that Layard cites, it’s much smaller than many experts, including Layard himself, had assumed. If all other factors are equal, someone with twice your income is likely to be only 2% happier.

Given that many of us would dearly like to double our income, that is a sobering statistic. It throws into question a whole range of assumptions that underpin most Western societies. Chief among these is the notion that if you climb the economic ladder, you will feel the benefit. It’s one of the reasons we profess to value social mobility, because in a meritocracy, good things are supposed to come to the highest achievers.

What makes a much bigger difference than income inequality per se is unemployment. If you’re unemployed, your life satisfaction is likely to be reduced by 0.7 points (out of 10); that is, 7%. That’s a big drop, similar, in fact, to the effect of being widowed or separated.

Another fallacy that the research exposes is that old saw that life was better in the past, when things were simpler and more honest, and everyone was friendlier. In short, the figures suggest otherwise.

“This is probably one of the best periods the human race has been through,” says Layard. “In the world as a whole, happiness has risen since 1970.”

In Western Europe there has been a small rise in happiness (except in Greece and Italy, where it’s fallen), whereas in the US there has been no change. The countries that report the highest levels of happiness in the world are the Scandinavians – Finland tops this group with a 7.8 out of 10 score – then the Netherlands and Switzerland. New Zealand scores a healthy 7.3. All the countries in the top 10 are either relatively small in population or, as with Canada and Australia, have very large land areas. The highest placed nation with a population of more than 50 million is the UK (7.1), which is a slight surprise, as everyone always seem to be moaning here.

At the bottom of the table are Afghanistan, Central African Republic and South Sudan, which hover around the 3.0 mark, as you might expect for what are essentially war zones. But even within nations, where you live has a significant bearing on happiness levels. Last year, Ribble Valley was named the happiest place in Britain, according to the Office for National Statistics. Squeezed between the northern mill towns of Preston and Burnley, it’s not the first place you’d go in search of a happy valley – just next door is South Ribble, which rates as the second unhappiest place in the UK. But the Ribble Valley has some beautiful countryside, pretty market towns and strong communities.

Finnish Prime Minister Sanna Marin, second from right, poses with members of her new Government. Photo/Getty Images

Utilitarian argument

Much of Layard’s research is concerned with the UK. But the lessons it provides are relevant to most other nations. For example, average scores are misleading because they conceal wide variations, and not just in geographical terms. Ten percent of the UK reports an average happiness score of 9.4 and another 10% have an average score of just 3.8 – that’s getting down towards war-zone figures. In other words, a sizeable minority are profoundly happy, whereas an equal number are utterly miserable.

Although Layard believes that we should judge a society by how much people are enjoying their lives, he says it is the extent to which people are relieved from misery that is the critical factor. As he writes: “This is my concept of social justice: I am concerned with how happiness is distributed.”

Not wealth, not opportunity, not minority rights, which are the causes most social-justice activists embrace, but happiness. It isn’t that Layard is against these principles, only that, by his reckoning, they should be judged by what they do to increase happiness.

It’s a rather utilitarian argument that may not inspire many placard-carrying idealists. But for Layard the issue is quite straightforward. As he puts it: “The role of government should be, as Thomas Jefferson said, to sustain the life and happiness of the people. All the other objectives of government matter because they affect how happy people are.”

If that’s the case, how do we actually improve happiness or, to put it more urgently, relieve unhappiness? In recent years there has been a lot of promotion of a universal basic income to narrow inequality and remove the stigma of unemployment. The theory goes that it’s also a preparatory step towards a future in which machines and artificial intelligence render humans obsolete as workers.

Thomas Jefferson. Photo/Getty Images

Layard has little to say on this subject, which some may see as a missed opportunity, given the experience of a two-year Finnish trial in 2017-2018. The experiment was restricted to the unemployed, and they were given a basic wage to help them find jobs without losing the money if they were successful. In the event, there was no effect on employment levels  the participants did report being happier and less stressed.

Layard concentrates instead on the importance of work. Jobs, he says, are something from which people draw meaning, “a social connection” and “a sense of being useful”.

As you’d expect, physical health is strongly related to well-being but perhaps the most neglected cause of unhappiness is mental illness, which Layard says is “by far the most important single factor” in the UK and elsewhere. It’s a problematic category, though, because who’s to say if poor mental health results in unhappiness or vice versa? Layard, the son of a psychiatrist, is too solutions-based to get bogged down in such distinctions.

He is an advocate of the positive psychology movement and cognitive behavioural therapy (CBT). Both approaches have their critics. In her book Smile or Die, the American writer Barbara Ehrenreich placed positive psychology within a dubious “cult of cheerfulness”, alongside motivational speakers and self-help gurus. A few years ago, a leading positive psychologist, Barbara Fredrickson, was exposed for cooking her figures in an influential academic paper on “human flourishing”. Added to which many psychotherapists suggest that the efficacy of CBT has been overstated, precisely because, just like GDP, it lends itself to empirical measurement.

Layard is not persuaded by these arguments. He says that CBT has a 50-70% success rate in treating anxiety disorders, with limited relapse, and a 50% cure rate with depression and a halved rate of subsequent relapse. He laments the limited availability of CBT, but acknowledges the prevalence of psychotherapeutic counselling. Real improvement in mental health, he writes, “needs to be based on solid science”.

After mental and physical health, come relationships – our family, our partners, whether we have a partner, and whether we’re happy with that partner. As this is all the messy stuff of being human, you may think a) that it’s unchanging, and b) that there is not a lot of external influence that can be brought to bear. Layard believes otherwise.

He says that familial relationships have radically changed in recent times, noting that children now enjoy a much more equal position in the family hierarchy. He also produces evidence to support his belief that CBT and social care can have a positive effect on dysfunctional families.

Barbara Ehrenreich. Photo/Sigrid Estrada/Supplied

Fearful of crime

The last major factor governing happiness levels is community engagement. In the UK, 15% of people aged between 16 and 79 feel lonely. For those over 80, the number doubles. We are innately social animals, but we live in increasingly unsocial environments – cut off from physical interaction by the growing prevalence of social media and computer technology, and fearful of crime, even though it has been declining in the West for several decades.

When we consider how much crime dominates news reporting and TV drama, the preoccupation is perhaps not that surprising. It seems that people are more inclined to stay in their homes, reading and watching stories about the murder and mayhem they fear is taking place outside.

“In Britain,” writes Layard, “a doubling of the local crime rate reduces the average health of the average local resident by 0.1 points [when measured on a scale of 0-10].”

If that’s a classic liberal answer, a more complicated area for progressives is the finding that greater ethnic diversity tends to lower levels of trust and satisfaction – at least in the US and the UK. Looking at the world as a whole, Layard writes, there is no evidence, when all other things are equal, that societies with a high proportion of people born elsewhere are less happy.

“I think the story of migration is that in the end, the migrants become the natives,” says Layard. “So, in that sense, zero migration is a ridiculous idea.”

All the same, he wants to see a more controlled flow of migration to sustain “a harmonious community”. He also calls for greater assimilation of migrants, a position that is anathema to the multiculturalist vision of society, which prizes cultural difference and discrete communities.

Taken as a whole, the book is a careful and rational attempt to shift our view from a fixation on economic performance to what is the most important outcome for most of us: our own happiness. But it’s hard to escape the fact that so many of Layard’s recommendations require investment – in jobs, mental-health treatment, management training, migrant language teaching and much else besides.

To pay for it, nations will have to look to their GDP, which brings us back to where we started. Last year, New Zealand joined a growing number of countries challenging the economic over-reliance on GDP by placing “well-being” at the centre of its budgeting decisions. When the Government, led by Prime Minister Jacinda Ardern, introduced its Wellbeing Budget last May, Layard hailed it as a “game-changing event”.

Ardern is mentioned in passing in the book but he does not examine the New Zealand experience, doubtless because it’s far too early to reach any conclusions. Critics point out that in terms of allocating resources to key areas like heath, welfare and education, the well-being budget was no different to previous budgets.  A government that promised to be “transformational” also said 2019 would be its year of delivery. So, was that it?

Ribble Valley in the UK. Photo/Alamy

For richer or poorer?

Layard argues that, in principle, over time social investments will deliver greater economic rewards by saving money on the far greater costs of not investing. In the end, he’s convinced that what he calls the “ruthless competition” of unregulated capitalism “destroys happiness”. I wonder, though, if it’s possible for a shrinking economy to produce greater happiness?

“Of course it would be,” he says firmly. “The role of income in creating happiness is limited at our current rate of income. But even in a poorer country such as China, happiness has not risen, despite the extraordinary economic miracle. I would say if we spent more of our budget on restoring our community services, our children’s services, old people’s services, social care, all the things that actually affect people’s day-to-day lives, we would have a much happier society than if we just put all the money into things that are thought to produce economic growth.”

The problem with a philosophy that celebrates getting ahead, says Layard, is that it is a zero-sum game because inevitably someone else gets left behind. Every winner necessitates a loser. He sees this as an old-fashioned male approach to economics, and he would prefer to see something more “female” – in the book, he describes women as “more altruistic” than men.

But is there a troubling paradox here? Happiness analysis is concerned with the individual, what we think of our own lives, even if all those individuals are then totalled up. Isn’t that perspective the opposite of altruism: solipsism? Won’t it just lead to the kind of neurotic self-obsession of which self-help literature has often stood accused of encouraging?

Well, it would, says Layard, if we were only concerned with our own happiness. The most fundamental cultural development he would like to see is the fostering of the belief that the highest good possible is spreading happiness. “I think we should tell young children very early in life that our job is to make people happy,” he says.

It’s a wish that calls forth the dread potential of, on the one hand, do-gooders deciding that they know what’s best for other people and, on the other, people pleasers incapable of attending to themselves. The road to hell, as the old saying goes, is paved with good intentions. He takes the point, but maintains that there is a wealth of evidence about what makes people happy and there is now the science of happiness to help guide us in implementing the right policies.

Like everything to do with human beings, it’s probably a little more complicated than that. But Layard is to be commended for at least encouraging us – and in particular his fellow economists – to think about a different way of looking at the world and our purpose within it. One day, to borrow from Austen, it might even be a truth universally acknowledged that happiness is the key to a successful life.

Can We Be Happier? Evidence and Ethics, by Richard Layard (Penguin Press, $50)

This article was first published in the February 1, 2020 issue of the New Zealand Listener.

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