TCS Daily

Don't Worry, Be Happy -- Or Else

By Arnold Kling - April 19, 2006 12:00 AM

"those interested in maximizing society's welfare should shift their attention from an emphasis on increasing consumption opportunities to an emphasis on increasing social contacts."
-- Daniel Kahneman and Alan Krueger, Developments in the Measurement of Subjective Well-Being

Roll over, Adam Smith. You said that we can trust the self-interested actions of individuals to benefit others. You said that an "invisible hand" guides markets, meaning that they did not require government control. But some of your economist descendants now claim that the self-interested actions of individuals do not even benefit themselves. Instead, government should intervene to make sure that individual choice serves to promote subjective well-being.

Alan Krueger and Daniel Kahneman hail the progress that has been made in measuring subjective well-being, or happiness. They say that researchers in this field, which is on the boundary between economics and psychology, have developed reliable methods to measure how well a person is feeling. This in turn enables them to make reliable assessments of how happiness is affected by income (both in absolute terms and relative to that of others), marital status, and how people allocate time among various activities, from socializing (good) to commuting alone (bad).

How Low Is Your U-index?

It seems logical that these findings should be taken into account when formulating government policy. In their paper, Kahneman and Krueger propose a U-index, where the U stands for "unpleasant" or "undesirable." They write, "The U-index measures the proportion of time an individual spends in an unpleasant state." The U-index is like a golf score -- a low number is a good thing, and vice-versa.

It seems silly for government to evaluate policy on the basis of how it affects something like GDP or consumer spending, when there is a more precise measure of well-being available. The U-index would be a better number to use for fine-tuning policy.

We can imagine how policies might evolve if, as Kahneman and Krueger suggest, the government views its goal as one of minimizing the average U-index for its citizens. Government would use laws, regulations, and monetary incentives to encourage activities that lead to pleasant states and to discourage activities that raise in the U-index.

Married people have lower U-indexes (less time in an unpleasant state) than singles. Perhaps divorce laws ought to be strengthened to reflect this.

The authors report that spending time in what they delicately refer to as "intimate relations" helps to lower the U-index. Maybe the FCC needs to fine the TV networks that don't do more to promote sex.

Raising children is more stressful than people expect. Government should incent couples to only have the number of children that is optimal for the U-index, which may turn out to be zero children.

We may find that caring for people with severe mental or physical illness causes a lot of unpleasantness. Government would need to do something about that. Perhaps incurable people should be killed or put into separate colonies, as was once done with lepers.

The Slippery Slope

At this point, the reader may have surmised that I am not altogether sympathetic to Krueger and Kahneman. In fact, you may think that the totalitarian examples I have come up with are an unfair distortion of their work. They merely claimed to be "interested in maximizing society's welfare." Hasn't that always been the goal of economists?

Indeed most economists, with the exception of the Austrian school, have seen the economist as an adviser to government. The advice of Adam Smith and David Ricardo was to promote free trade. To this day, I believe that the most reliable advice economists can give on topics such as trade, outsourcing, and immigration, is to point out the broad, long-term and often unappreciated benefits of these activities relative to their narrow, short-term and exaggerated adverse effects.

In the twentieth century, economists refined their analysis of the social benefits of markets. They proved that free markets lead to an optimal allocation of resources. This proof rests on a specific definition of "optimal allocation" and, more importantly, on perfectly competitive markets.

Because some important industries clearly are not perfectly competitive, economists conceded the desirability of regulation of such industries. Then, during and after the Great Depression, economists focused on the need for government to manage the business cycle and in particular to fight unemployment.* Finally, in the 1970's and later, economists discovered many types of market imperfections, notably problems related to information, that could be used to justify government intervention -- see my essay on Hayekians and Stiglitzians.

My point is that -- with the exception of the Austrians -- economists have been going down a slippery slope of interventionism for a long time. Krueger and Kahneman are simply further down that slope.

The Role of Economists

Perhaps the original sin here is to think of the economist's role as that of policy advocate. The policy advocate combines the job of a technician with that of a preacher (Robin Hanson made this point to me during a discussion that we had after hearing a talk from the economist Deidre N. McCloskey). The technician predicts the consequences of a policy. The preacher argues for the policy.

With research into subjective well-being, economists are making statements about what constitutes the good life. In doing so, we are encroaching on territory once claimed by philosophers and theologians -- and, more recently, by self-help gurus. In the 70's, it was I'm OK, You're OK. Now, we are saying "I have positive net affect, you have positive net affect."

One justification for happiness research is that it is more "scientific" than the typical self-help book. The Kahneman-Krueger paper makes a strong case for the methodological rigor of their research program. Krueger is a highly-regarded Princeton professor. Kahneman was awarded the Nobel Prize in 2002, an honor which no self-help author can yet claim.

Still, I have a feeling that if happiness research proceeds far enough, it will serve merely to rediscover some eternal truths. For example, this New York Times story cites work by Claudia Senik, who found that "that when people aspire to a better quality of life within the next 12 months, the attempt to reach that goal alone -- the anticipation independent of the outcome -- seems to bestow happiness in the present." Have the sages not been telling us this for centuries?

Meanwhile, it may be too early to proclaim that "science" is going to inform government policy to lead us down the path to a good life. We have had many false starts with "science" in the past. Consider "scientific socialism" or the psychological "science" of Freud or of B.F. Skinner. The "science" of subjective well-being may be another chimera.

I wonder how far Kahneman and Krueger would be willing to go to demonstrate their beliefs in the new "science." Doing research and writing papers only helps to increase their consumption opportunities, and it takes time away from social contacts. Surely, for the sake of their subjective well-being, they should stop spending time studying subjective well-being.

My guess is that Kahneman and Krueger would say that they enjoy doing research. However, that only proves their point that individual preferences are untrustworthy, and that government intervention is needed. Somebody stop them, before they publish again.

Arnold Kling is a TCS Contributing Editor and an adjunct scholar with the Cato Institute. He is the author of Crisis of Abundance, a book on health care policy.

*For economists who are familiar with the jargon, there is a wonderful statement of the importance of macroeconomics, attributed to Nobel Laureate James Tobin: "It takes a heap of Harberger triangles to fill an Okun gap." No one seems to know when Tobin said this, but a lot of us have heard about it.


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