Sunday, December 14, 1997

Big spenders find happiness has no price tag

By LARRY ELLIOTT / The Guardian

It's often said that those who say money can't buy happiness simply don't know where to shop.

So, when you've finished leafing through the newspaper, the odds are that you'll be off to the mall, armed with your plastic for a bit of conspicuous consumption.

After all, Christmas is only a few weeks away and spending money makes you happy, right?

Wrong. According to economists, it's a myth that the more we spend, the better we feel.

Put another way, the notion that Karl Marx is less relevant to the modern world than shopping malls may have to be reassessed. There is something in Marx's belief that capitalism would be brought down by its own contradictions.

The evidence -- published in this month's edition of The Economic Journal -- that the link between happiness and income/consumption is tenuous -- is quite compelling.

Measured by annual growth in per capita incomes, the West is much, much richer than it was 50 or even 20 years ago. But in the U.S. reported happiness has gone up only fractionally over the post-World War II period, and in Europe reported levels of "satisfaction with life" are only slightly higher than in the mid-1970s. In some countries, including Britain, they're actually lower.

Nor, according to economist Andrew Oswald of Warwick University in England, is this the end of matter. Rich countries tend to have higher levels of suicide, and in the past 20 years the number of male suicides has gone up.

The last 20 years have, of course, been a period of very high unemployment in Europe, and Oswald finds that unhappiness is far more prevalent among the jobless.

Money, he concludes, buys us very little well-being, and yet we see everyone around us striving to earn more of it. Why is that? Oswald says it is akin to the spectator who stands up at a football game to get a better view; by the time all his neighbors are also standing up, he or she is no better off than before.

Chinese economist Yew-Kwang Ng argues that once the basics of life are provided for, further consumption can actually make us worse off. "Our ways to increase happiness further then take on the largely competitive forms, like attempting to keep up with the Joneses," he says. "From a social viewpoint, such competition is pure waste. On top of this, production and consumption to sustain the competition continue to impose substantial environmental costs, making economic growth quite possibly happiness-decreasing."

American economist Robert Frank puts it like this: In Society A everyone lives in a house with 5,000 square feet of floor space, while in Society B everyone has 3,000 square feet of floor space. Contrary to the accepted norms of Western society, provided people from Society A do not come into contact with those from Society B, there is no discernible difference in respective levels of well-being.

But it takes far more resources to build a 5,000 square foot house than a 3,000 square foot house, and they might add more to our total well-being if they were used in a different way. Frank cites a number of hypothetical examples: would we rather have the extra 2,000 square feet of floor space or a 15-minute commute by a rapid transit system, for example?

And who would be happier: people in 5,000-square-foot homes who can only find time to see their friends once a month, or people living in 3,000-square-foot homes who meet up with their chums once a week?

Frank argues that we'd all be better off if we all agreed to consume less, just as we'd all be better off if we left the office at 5 p.m. rather than 8 p.m. But we don't, because we think that everybody is consuming more and enhancing promotion prospects by working late.

His solution is a progressive consumption tax levied on a family's income minus its savings. This would encourage greater savings and permit a transfer of resources into the things that really make us happy -- better education, good health and a decent environment.