Tuesday, 30 November 2010

Happiness Economics

The idea that General Well Being is something the Government should measure has brought the Devil out of Blogtirement for a cathartic rant against the

"crap that our massively fore-headed twat of a Prime Minister seems so keen on..."
But, I think differently. General well being is important. Happiness economics is not only interesting on a political level, It is interesting on a personal level too. It fascinated me long before I read Freakonomics, which applied statistical methods to situations which had not been so measured before. It started when I was commuting (yes commuting) from Northampton to London daily, a journey of over 2 hours, and I read an article which stated that a short commute was equivalent to someone on £30k doubling their income. Not particularly because a short commute is particularly happiness making, but a long-one eats into free time, reducing leisure and increasing stress. The example was chosen to illustrate that above a certain point, income decouples from happiness. Income is an extremely poor indicator of happiness, and seeking extra income is an extremely poor way of becoming happier. However, I knew I hated sitting on the train, so I considered the extra happiness which resulted in my moving to town. So I made a rule - if it takes more than 20 minutes on a bike to get to work, move house. I think I am happier for it. I am also convinced by studies which appear to show strong positive correlations between happiness and marriage; sport; physical fitness regular social interactions and so on. These are NOT the things that government can influence directly. Each individual chooses to commit to a sports team or wife, but they can encourage, provide facilities and incentives and, above all, get out the way.

And there is a lot the Government could do about happiness in those terms. Over to Dan Hannan, who thinks there's something in this happiness economics, and suggests some things that the Government can do to improve happiness.
They can create a climate where we are unlikely to be victims of crime. They can prevent us from being invaded, or defeated in war. They can guarantee that property rights are secure, contracts fairly enforced, disputes impartially arbitrated, the law open to all seeking redress. They can ensure that children receive a decent education, whatever their parents’ means. They can do these things without confiscating any more of our assets through taxation than absolutely necessary.
The point is freedom, or more accurately the upper tiers on Maslow's hierarchy of needs: self actualisation. You're not going to be self-actualised if you're hunkered down on a sink estate, terrified of the local hoodies. So the Tax-payer pays for a police service. What Government can do is ensure that instead of policing comfy, safe middle-class areas, or harassing motorists (which appears to be the police's priority), they get in amongst it in the grotty estates, reassuring the law abiding that they're not alone by patrolling. This is what the public WANT the police to do, but the police would rather stay in their cars (for operational, rather than fried dough confectionery reasons, naturally). Happiness is, in part, the feeling that you are in control of your environment, and directly elected police chiefs will help there. The regular referendums as Hannan suggests in the cantons of Switzerland may help too, but does living in the kind of stultifying social morass such a society often creates, which sees sending someone to tame another's unruly lawn and sending the latter a bill reasonable? I think not.

There is a lot the Government can do to encourage happiness. Very few of them involve spending money. Very few of them involve removing options from people by banning stuff, or making drink & drugs (for example) more expensive or illegal. I doubt it's got much to do with an absence of diversity outreach co-ordinators and other local government prod-noses either. The "cuts" are going to make diversity outreach co-ordinators miserable by making them unemployed, but no-one else is going to give a shit.

The fact is, whilst income isn't correlated with happiness for most people in the UK, it is tightly correlated below about £14,000 per year, this is true world-wide. Leftists make much of the GINI coefficient: that income inequality is what matters. And to a point it does. So why are we taxing someone on £14,000 per year at all? Why are the working poor facing 90% marginal tax rates? The answer there is "leftist redistributive policies". And the left have therefore set a trap for the poor: What matters is not "What am I earning now?" but "if I work hard, do I have the power to earn more?" If the Government takes 90% of everything extra you earn (and for much of the working poor, it does), the working poor are absolutely not in control of their life, there is no way for them to improve their lot - all extra work brings is less time to spend on worthwhile things like spending time with your children. This is MUCH more powerful in destroying wellbeing than seeing "someone has more than me, waaaaa!" The lack of control caused by being poor which actively creates misery, not the straight envy of the rich, as leftists fondly wish. The state is, in the manner it conducts redistribution, keeping a boot on the face of the working poor as they struggle up towards happiness.

Of course, the working poor are a bit happier happier than the most miserable people in British society: the long-term unemployed, who are also screwed by leftist policies. In many cases priced out of the labour market by high employment taxes, and at the margin, by the minimum wage; it just costs too much to employ someone without skills. Without a job, you can't get skills. Reducing taxes like NI on jobs would improve matters. Leftists, though make much of the importance of job security in happiness, arguing for ever greater "rights" (in reality, risks and obligations on someone else) for the employed. Job security does indeed create happiness. The far greater misery, though is unemployment, and by every job saved costs jobs not created elsewhere, because of the increased risk (and therefore cost) of employing a new worker, so fewer, more expensive workers are hired. Freer labour markets lead to higher employment, at the cost of reduced job security. There might be 10% unemployment in the USA now during this recession, but there were decades of 10% unemployment in Germany, France and Spain, where the labour market was divided between safe job insiders and people who would NEVER get a job in their lives.

And let's talk about taxes. If "happiness economics" suggests that raising your income is a poor way to improve happiness, does that not argue for higher taxes? No. Because an average worker might not "spend" the tax cut on stuff, but instead on the need to take overtime. He might, as a result of a tax cut, get home earlier to have a meal with his children, instead of slaving for the Government till 8pm. The Freedom lower taxes brings might be spent on a new car, but it is just as likely to be spent on something worthwhile which isn't measured.

So, you argue for ever higher taxes to finance education or health services, which raise a poor person's consumption and reduce inequality. And they do, but they do not increase the self-actualisation element of happiness. They could be: A voucher is something to spend on education, this engages the parent and incentivizes the school to improve. It enables parents to select a school reflecting their beliefs (yes, unfortunately even lunatic ones - an important freedom is the freedom to be a twat. Look at it like this: Every creepy and damaged little homunculus who goes to a creationist school is one which is not competing with your spawn for jobs in bioscience), which is a form of happiness-making power over one's environment. An LEA-provided, one size fits all school place does provide the consumption element of inequality-reduction, but it doesn't involve anyone else in the decision making, negating much of the happiness-improvement which could be achieved by such state spending.

Health spending is a subject for another post. It is reasonable that taxes be seen as a form of insurance where the premiums are on ability to pay, rather than need. Most poeple see this as reasonable and are happy to see this funded out of general taxation. But the state-monolithic nature of the NHS is not necessarily the best way to DELIVER healthcare free at the point of delivery. The NHS is not the same as 'healthcare'. Tax-payer funded, but privately provided services will probably be more efficient. What they will certainly be is more responsive to patient needs. Waiting for delayed and cancelled appointments, long, pointless waits for consultant's appointments and generally being treated like an embuggerance by the NHS when you turn up to get fixed are features of the NHS's take-it-or-leave-it structure. The state does not have to DELIVER healthcare, even if it funds it. A more responsive, less dehumanising system would make people feel more valued, and therefore happier with the services, which for most things, except cancer, seem to be pretty good.

So higher taxes could be used to fund heath and education (and funded better), but so much of Government spend is financing an actively misery-making welfare state, and so much is wasted on pointless freedom and self-actualisation-denying Government initiatives that to use "health 'n education" as an argument for higher taxes is intellectually dishonest. To use redistributive GINI coefficient arguments is lumpen stupidity garnished with envy and spite. Rich people don't make poor people miserable directly; rather poor people are miserable because they don't have the choices rich people do. If your solution to that problem is to remove the choices from rich people, you're a spiteful cunt, or a socialist, which is the same thing. HIGH TAXES MAKE PEOPLE MISERABLE, whether they're poor or rich. But especially if they're poor, so stop taxing them! By all means fund health and education properly out of taxation, this seems to be an entirely reasonable use of Taxpayers money, but this does categorically NOT require the Government to take 50% of the national, or any individual's, pie. That is too much.

The fact is that the best thing Dave can do to make the country happier is tax business less, scrap NI, removing the tax on jobs and raise employment; raise the personal tax allowance to take the working poor out of tax; and make the police subject to local democratic control by means of elected sheriffs who respond to resident's needs, and local schools responsive to the people (as opposed to local authority bureaucrats) by introducing a voucher system; decentralise (and probably break up) the NHS, cut useless and expensive state spending on diversity outreach co-ordinators, and thereby eventually lower taxes, when Labour's catastrophic deficit has finally been got rid of. Most of which the Coalition is quietly getting on with. Whilst fanatics on the left are trashing the place & bleating about cuts, and those on the right see betrayal everywhere, the coalition appears to this observer to be imperfectly, hesitantly, introducing some reasonable, liberal polices some of which are actually going to make the country happier. Which when you compare it to the vile panopticon the last lot were creating, is a big improvment.

It would be nice for Dave if he got some credit for it. Which is why he's measuring happiness.


The Heresiarch said...

"The cuts are going to make diversity outreach co-ordinators miserable by making them unemployed."

Well, I'd like to think so. But I wouldn't bet on it.

Anonymous said...

Does anyone have any idea what the approximate value (i.e. share price) would be of the NHS if it were floated on the stock exchange? If we flogged it off piecemeal, how much would we raise towards clearing the national debt?

Also, does anyone know what the value of each and every school in the country would be?

Mr. Pants.

cabalamat said...

Why are the working poor facing 90% marginal tax rates? The answer there is "leftist redistributive policies".

When we had a Labour government, this was fair comment. But now we have a Tory government (with Lib Dem hangers on), and they seem intent to make the problem worse -- for example they intend to evict council house tenants from their homes if they get a half-decent job, which would imply a tax rate of over 100%. Not that this should surprise anyone: the last time the Tories were running the show they had 18 years to fix the problem and didn't.

The truth is that all 3 big parties are unfit for purpose and the sooner they are all consigned to the dustbin the better.

cuffleyburgers said...

By and large an outstanding post.

Nigel Sedgwick said...

Jackart writes some very good stuff, especially: (i) money is not the be-all and end-all of life; (iii) government can pay for things such as healthcare and education, without having to deliver them as well.

Excellent; really excellent.

Then he writes: "It would be nice for Dave if he got some credit for it. Which is why he's measuring happiness."

That does not follow (which is far more politely put than my first thought).

There are also other good things that are beyond the legitimate remit of government: being happy is one of them.

Does Jackart really think that government can measure happiness?

Does Jackart really think that one-size-fits-all can be applied to happiness any more than it can be applies to a whole load of other non-essential crap that government inflicts on us?

Best regards

Jackart said...

Of course it's not a one-size fits all happiness indicator. And the GWB index has a lot of bollocks in it.

But looking at what behaviours drive self-reported happiness is interesting, both on a personal level, and at the policy level.

It is reasonable that government measures not only how rich a population is, but how happy it is too. (although part of me wishes the Government would collect less data on the economy, like John Cowperthwaite's Hong Kong, lest they attempted to do something about it)

The last sentece was merely to bracket the piece, it started with "why the fuck is dave doing this?" and finishes with "in summary this is why dave is doing this".

Nigel Sedgwick said...

@Jackart, who writes: "Of course it's not a one-size fits all happiness indicator. And the GWB index has a lot of bollocks in it."

I suppose loyalty has a lot going for it, especially if one accepts that it has no immediately pressing logical basis but only the long-term return of favour.

In my house, we call that "jam tomorrow" - and we don't buy much of it.

Jackart, I note the re-iteration of your view, as originally expressed in your main posting.

Copying, with some politening and improving edits, from the aside in my comment at Samizdata on Tuesday: "Now we have Mr Cameron wanting to substitute a 'happiness index' for our economic growth index. Actually, he has the realism to see that his government has pretty much zilch chance of success under the prevailing success index of economic growth. He is totally pessimistic that he can convince the electorate that past mistakes are so awful that recovery needs to be measured in decades, not years. He is hopey changey that 'happiness' will be more in his favour. And, of course, he is right: there is no chance whatsoever that happiness can be firmed into numbers in the same way as GDP - all he needs is a more subjective 'metric' - and an electorate that believes (in) him."

When will the current government realise that a decade of excess will require correction by more than a decade of prudence, unless there is some real austerity. And the biggest spender we have is government: they must take the lion's share of whatever combination of prudence/austerity is undertaken, and live with the electoral consequences.

It would surely be better, politically, for the current government to have 3+ nasty years followed 2- relatively better ones, before the next general election. It would be better for the country if government made some serious effort to make expenditure (averaged over those years) at least break-even with respect to tax/income.

What we actually have is a government pursuing the policies of an over-bureaucratic and socialist-ised Civil Service (supported by half of his coalition partner).

To echo Mrs Thatcher, Mr Cameron needs a 'Willy'; otherwise he is going to lose. That is lose first to the self-interest of the bureaucracy; lose second what modest faith the electorate has in him.

Or does he view himself rather as Ted Heath, in the cycle of political fortunes of this country?

Best regards

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