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Should economists and policy-makers focus on our wealth or well-being?

Which should economists and policy-makers focus more on?


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Kandahar

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I've been reading a lot about Happiness Economics lately. Generally speaking, having more money doesn't make people any happier once their basic needs are met. Things that do have a correlation with happiness include a successful marriage, having lots of friends, donating time/money to people in need, being religious, not having kids who are still living at home, having a job, and having leisure time.

The King of Bhutan measures his nation's progress in terms of "Gross National Happiness"...a measure of his citizens' subjective well-being by polling them on how happy they are. Today, Bhutan is one of the happiest places on earth despite having a relatively low GDP per capita.

I was wondering if maybe we wouldn't be better off adopting a similar metric. If money doesn't make people any happier once their basic needs are met, why are nearly all of our economic policies geared toward optimizing our production or distribution of wealth? Would we be better off to focus more on improving our happiness rather than our wealth?
 
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repeter

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Happiness and well-being change radically from one person to another, but GDP growth/decline is something that is pretty fact-oriented. For that reason, and pretty much that reason alone, GDP should be the gauge IMO
 

Kal'Stang

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Happiness and well-being change radically from one person to another, but GDP growth/decline is something that is pretty fact-oriented. For that reason, and pretty much that reason alone, GDP should be the gauge IMO
From the sounds of it the King of Bhutan seems to be doing just fine with a GNH over a GDP. Think I'll look up some things about Bhutan.
 

Orion

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You know the other reason why Bhutan is so happy?

Outsiders are banned except under strict accompaniment during tourism.

I tried to get a visa to go there when I was last in Asia and it was virtually impossible. You need over $200 USD per day to go, and you have a guide who only lets you go to specific places.

They haven't been corrupted by our globalist economy or our ideas about materialism.
 

Kandahar

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Yeah, it's one of the most closed societies in the world. They're VERY reluctant to allow outside influences into the country. But it's not generally an uber-repressive place like, say, North Korea. It's a hybrid of a benevolent monarchy and a representative democracy. It's an interesting system of government that could probably never work in most other parts of the world. But I think the point is that they've figured out what makes their citizens happy, and striven to improve those variables...even at the expense of things that make their citizens wealthier like most countries.

I'm not necessarily saying that economic development is an unworthy goal. There is a very strong correlation between national income and national happiness, but only until a nation has enough to avoid poverty. The least happy nations in the world are the ones you'd expect - sub-Saharan Africa, southeast Asia, etc. But once a nation has a sufficient level of affluence, the relationship with happiness ceases to exist. The happiest nations are not always the wealthiest. Bhutan, Costa Rica, and Colombia are very happy places.
 
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phattonez

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Wealth is well-being. :shrug: The problem is that people tend to define wealth too narrowly to only mean money.
 

Orion

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But I think the point is that they've figured out what makes their citizens happy, and striven to improve those variables...even at the expense of things that make their citizens wealthier like most countries.
Somewhere along the way they retained values of what matters most in life. In Bhutan's case, they are largely Buddhist, and so materialism is not as important because it is not a means to an end in of itself.
 

Kandahar

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Happiness and well-being change radically from one person to another,
True, but polling them can at least determine how happy they are in the aggregate.

repeter said:
but GDP growth/decline is something that is pretty fact-oriented. For that reason, and pretty much that reason alone, GDP should be the gauge IMO
I disagree. GDP per capita is typically used as a proxy for well-being, despite the fact that it has little relationship with well-being...at least for developed countries.
 

phattonez

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Happiness and well-being change radically from one person to another, but GDP growth/decline is something that is pretty fact-oriented. For that reason, and pretty much that reason alone, GDP should be the gauge IMO
GDP is a horrendous measure of wealth. It doesn't count barter transactions are increasing net utility (though I hate to use that phrase), and it also counts government spending as being as efficient as private spending when it clearly is not, since we know what we want better than the government.
 

TurtleDude

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I've been reading a lot about Happiness Economics lately. Generally speaking, having more money doesn't make people any happier once their basic needs are met. Things that do have a correlation with happiness include a successful marriage, having lots of friends, donating time/money to people in need, being religious, not having kids who are still living at home, having a job, and having leisure time.

The King of Bhutan measures his nation's progress in terms of "Gross National Happiness"...a measure of his citizens' subjective well-being by polling them on how happy they are. Today, Bhutan is one of the happiest places on earth despite having a relatively low GDP per capita.

I was wondering if maybe we wouldn't be better off adopting a similar metric. If money doesn't make people any happier once their basic needs are met, why are nearly all of our economic policies geared toward optimizing our production or distribution of wealth? Would we be better off to focus more on improving our happiness rather than our wealth?
I don't think they really have the ability to control either. it seems rather haphazard
 

Kandahar

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I don't think they really have the ability to control either. it seems rather haphazard
Surely governments have the ability to control the overall level of wealth through government policies (see: North and South Korea). I think they probably have the ability to control the overall level of happiness to some extent as well; it just hasn't been studied and debated as much as how to maximize wealth.

We know some things that cause happiness: Leisure time, successful marriages, giving to charity, etc. And we know some things that cause unhappiness: Unemployment, poverty, etc. It stands to reason that the government could affect at least some of these things through policy...for example, maybe they could help people have successful marriages by subsidizing or encouraging marriage counseling. Maybe they could encourage people to give to charity by giving people tax credits (instead of deductions) for charitable contributions. Maybe they could alleviate unemployment by abolishing the minimum wage, since a person's income doesn't affect happiness as much as having a job does. Maybe they could alleviate poverty through more anti-poverty programs and/or education reforms. Maybe they could affect leisure time (and unemployment) by offering tax breaks to businesses that have a 35-hour work week instead of a 40-hour work week.

These are just some ideas. Maybe not all of them would have the desired effect, but I definitely think that since we know the variables that cause happiness, and that since the government can affect those variables, that therefore the government can affect happiness.
 
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TurtleDude

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I tend to be happiest when the government is messing with my freedom and wealth the least
 

Kandahar

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I tend to be happiest when the government is messing with my freedom and wealth the least
But while that's a nice talking point, is it actually true? I'm not talking about what policies you favor; is your happiness actually negatively affected when the government implements a policy you don't like? I find that I am about equally happy regardless of which party controls the government, or whether I'm in a blue state or a red state.
 

TurtleDude

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But while that's a nice talking point, is it actually true? I'm not talking about what you WANT the government to do; is your happiness actually negatively affected when the government implements a policy you don't like? I find that I am about equally happy regardless of which party controls the government, or whether I'm in a blue state or a red state.
We have way too much government. mainly becuase those who don't pay for it vote in those who want to spend other peoples' money
 

Kandahar

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We have way too much government. mainly becuase those who don't pay for it vote in those who want to spend other peoples' money
Mmmk. Same talking point that you recite in every thread, regardless of the subject at hand. How thoughtful and original. Go post it in someone else's thread now. :2wave:
 

phattonez

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But while that's a nice talking point, is it actually true? I'm not talking about what policies you favor; is your happiness actually negatively affected when the government implements a policy you don't like? I find that I am about equally happy regardless of which party controls the government, or whether I'm in a blue state or a red state.
It is necessarily so. Someone else can't possibly make transactions for you that would be as good for you as you yourself would make. It stands to reason that when government makes a decision for you (and it is different than the decision that you would make) that you are necessarily worse relative to how you would have been had you made the decision yourself.
 

Kandahar

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It is necessarily so. Someone else can't possibly make transactions for you that would be as good for you as you yourself would make. It stands to reason that when government makes a decision for you (and it is different than the decision that you would make) that you are necessarily worse relative to how you would have been had you made the decision yourself.
This is premised on the assumption that whatever decision a person makes for themselves is necessarily the decision that makes them the best off. I question this assumption. There are times when people are not the best decision-makers for their own lives. As behavioral economist Dan Ariely says, people behave in predictably irrational ways...even when the "correct decision" (i.e. the one that makes them better off) is well-known to them. That's why people tend to procrastinate and exercise less than they should, for example. This isn't because they think that not exercising will make them better off; they know perfectly well that the opposite course of action is better, but just don't do it. The underlying assumption that people are always rational actors in their own affairs is faulty.

Second of all, I question your assumption that economic efficiency actually results in well-being. Even if your previous premise (that no one can make decisions for people as well as they themselves can) was correct, it does not logically follow that the increased economic efficiency would result in increased well-being. That pattern only seems to hold up until people have enough to meet their basic needs. Once a person has moved out of poverty, money doesn't really buy happiness. Other variables - family, charitable giving, leisure time, employment - play a much larger role than does wealth.
 
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phattonez

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This is premised on the assumption that whatever decision a person makes for themselves is necessarily the decision that makes them the best off. I question this assumption. There are times when people are not the best decision-makers for their own lives. As behavioral economist Dan Ariely says, people behave in predictably irrational ways...even when the "correct decision" (i.e. the one that makes them better off) is well-known to them. That's why people tend to procrastinate and exercise less than they should, for example. This isn't because they think that not exercising will make them better off; they know perfectly well that the opposite course of action is better, but just don't do it. The underlying assumption that people are always rational actors in their own affairs is faulty.
That's a value judgment. They make that decision because of their time preference (they'd rather do the work later than do it now, it's like spending money now rather than saving it). Besides, people will get 'punished' if the 'correct' decision is not made, which means that the the more it happens, the less inclined they will be to make the same mistake.

Second of all, I question your assumption that economic efficiency actually results in well-being. Even if your previous premise (that no one can make decisions for people as well as they themselves can) was correct, it does not logically follow that the increased economic efficiency would result in increased well-being. That pattern only seems to hold up until people have enough to meet their basic needs. Once a person has moved out of poverty, money doesn't really buy happiness. Other variables - family, charitable giving, leisure time, employment - play a much larger role than does wealth.
I never said that money buys happiness. In fact, I don't think I claimed any of the things that you are saying here. Forcing people to save more would mean greater production, but I wouldn't support such a scheme because people may see the utility of spending money now greater than the utility of saving money for the future. You can't decide how much we should save for the future at the expense of the present. Only individual actors with their respective time preferences can do that.
 
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