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There is no ‘paradox of prosperity’

So what if material progress doesn't always make us happy? It's still a good thing, and here's why.

Daniel Ben-Ami

Topics Books

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Contemporary critics of consumerism and popular prosperity are obsessed with what they see as a paradox. A central theme of their arguments is that economic growth does not make people happier. In their view, the pursuit of mass affluence is at best futile and is probably responsible for making humanity miserable. Often the growth sceptics argue that the pursuit of material goods is akin to a disease: they say the developed world is suffering from ‘affluenza’ or ‘luxury fever’ (1). Typically they conclude we should not attempt to become richer and often they argue for the pursuit of alternative social goals such as mental well-being.

But there is reason to question whether breaking the connection between prosperity and happiness is the killer blow that the critics assume. The growth sceptics seem to ignore the possibility that greater affluence could be immensely beneficial even if it does not necessarily make people happier. Nor do they understand that the propensity for human beings to be unhappy with their lot could have a good side. The striving for a better life is an important motor force of progress. The arguments the happiness pundits advance to show that prosperity does not lead to enhanced well-being are also dubious. And the policies they often propose to make people happier tend to be authoritarian.

The idea that there is a paradox inherent in the drive for affluence is one of the key arguments for contemporary sceptics on economic growth. Many of the most influential books on the topic even have the word in their titles (2). There is Gregg Easterbrook’s The Progress Paradox (Random House 2003), David Myers’s The American Paradox (Yale 2000) and Barry Schwartz’s The Paradox of Choice (Ecco 2004). Even those who do not use the word ‘paradox’ in the title often embrace the concept. Frequently it is referred to as ‘Easterlin’s paradox’ after Richard Easterlin, a professor of economics at the University of Southern California. He first drew attention to the lack of a clear relationship between happiness and affluence as far back as 1974 (3).

Richard Layard, an adviser to New Labour and a professor at the London School of economics, uses it as a central concept in Happiness: Lessons from a New Science (Allen Lane 2005). The opening paragraph states that: ‘There is a paradox at the heart of our lives. Most people want more income and strive for it. Yet as Western societies have got richer, their people have become no happier. (4)’

Although there are variations on the theme, the way Layard puts it is the most common form of the argument. Based on opinion poll data in many developed countries over half a century, the conclusion is that affluence does not make people happier. Once people have the necessities of life they do not appear to become more contented as a result of rising average incomes. In any given society the rich are, on average, happier than the poor. But the trend in individual happiness is more-or-less flat once society passes a threshold of perhaps $20,000 (£10,000) per person a year (5).

For many of the happiness gurus such evidence is decisive. As Michael Savage has previously pointed out on spiked it is difficult for anyone to present themselves as being against happiness (6). From the sceptics’ perspective only an unadulterated misery-guts could reject the happiness agenda.

Before examining how the happiness advocates explain this paradox it is important to remember that humanity is immensely better off thanks to growing prosperity. The sceptics tend to downplay or even ignore this crucial point. Whatever our subjective feelings, the rise of mass affluence in the developed world has had huge objective benefits. Such gains are also starting to spread to the developing world as it, too, becomes wealthier. Prosperity gives us the resources to live longer, healthier and more fulfilling lives.

Fortunately a new book by Indur Goklany, an American economist, examines the data in great detail. Its title clearly sums up the argument: The Improving State of the World: Why we’re Living Longer, Healthier More Comfortable Lives on a Cleaner Planet (Cato 2007). Goklany’s book takes a similar line to The Skeptical Environmentalist (Cambridge 2001) by Bjørn Lomborg, a Danish statistician, which infuriated environmentalists when it was first published (7).

There is an immense amount of detail in Goklany’s book but some of the key statistics are worth reiterating:

  • Life expectancy, which for much of human history was 20-30 years, increased from a worldwide average of 31 in 1900 to 66.8 in 2003. For the high income countries it has reached 78.5 years.
  • Infant mortality (death of infants before the age of one per 1,000 live births) was typically over 200 before industrialisation. That is over a fifth of babies died before reaching their first birthday. The worldwide average has fallen from 156.9 in the early 1950s to 56.8 in 2003. In the developed world the average is 7.1.
  • Improving health. The onset of chronic diseases is typically happening several years later than in the past. For example, white males aged 60-64 in America are two-and-a-half times more likely to be free of chronic disease than their counterparts a century ago.
  • Air quality. Despite the common prejudice that economic development leads to air pollution the evidence in the developed world overwhelmingly suggests that air quality is improving. For example, the traditional pollutants have declined in America for several decades.

The fact that the trend is improving does not mean that everything is perfect. There are many instances, particularly in the developing world, where things could be far better. But to the extent there are still problems they constitute an argument for more development rather than less. If the developing world could reach the current living standards of the developed world, that would be a start. Billions of people would be much better off.

Nor is it true that the developed world has reached the stage where it can no longer benefit from increasing prosperity. For example, there is considerable angst about a ‘demographic timebomb’ in which the working age population can no longer support an increasingly large ageing population. But as long as society continues to become richer there is no reason why it cannot support a larger number of dependents (8). To the extent that climate change is a problem the solution is also more development rather than less. Economic growth combined with technological development should provide the means for humanity to have greater control over the environment.

However, although defending the objective benefits of prosperity is a vital task, it is not enough to defeat the sceptics. Some will even recognise the gains associated with affluence while still arguing that it makes people miserable. Gregg Easterbrook, an American journalist and author, is one of the most prominent writers to take such a line. The sub-title of The Progress Paradox, his book on the subject, tell the story: ‘How life gets better while people feel worse’. Easterbrook argues strongly that affluence has brought enormous benefits while at the same time pointing to widespread misery in American society.

Although there are many variations of the argument, the sceptics’ explanation of the paradox most often hinges on inequality. Although they do not generally put it so baldly, they essentially argue that it is futile to pursue absolute increases in prosperity because relative inequalities will always exist. From such a perspective, to strive for greater prosperity can only make people more miserable as society will remain unequal. The most common solution they put forward is to use taxation to curb the consumption of the wealthy.

The sceptics’ argument on inequality takes two main forms. The first is that there are certain ‘positional goods’ that are inherently scarce for social rather than physical reasons (9). For instance, in principle there need not be any shortage of land for growing food because farmland can be made more productive. An area of land that once fed, say, 10 people could, with improved agricultural techniques, feed 100. But a plot of land used as a pleasure garden for one family cannot be divided up between ever-growing numbers of people (10). Similarly, someone who owns a Rembrandt often does so at least partly because of its scarcity value. It cannot be divided among more than one owner.

A parallel example is that places at top universities are inherently limited. Only a certain number of people can get into Harvard or Oxford. It may be one person rather than another who is successful but overall the number of such coveted places is limited. Competition for such places is a zero-sum game with some people winning and others losing but no overall benefit to society. A similar principle is also applied to top jobs and in many other areas (11).

The other main variation of the argument is that people judge their well-being by their relative position in society (12). Those at the top tend to be happier while those lower down are generally more miserable. The conclusion drawn from this observation is that everyone should stop striving for more. Even if the acquisition of more material goods gives us a temporary boost it does not lead to lasting happiness. We may initially be delighted if we acquire a new BMW or a plasma screen television but we soon end up adapting to our new standard of living. The cycle then continues with a drive to acquire ever more ridiculous material goods. Humanity, in this view, is engaged in a pointless ‘rat race’, or, to change the metaphor, walking a ‘hedonic treadmill’, which can only make everyone more miserable. Human well-being is therefore undermined by affluence.

Although the arguments on inequality may sound convincing, they are open to question. Even if some things are inherently scarce it does not follow that they are not worth pursuing. Competition to get into a top university, for instance, may help raise the standards of all high school students. In addition, the increase in resources that is associated with economic growth could help increase the standards of all universities. Even if inequalities persist there can be gains from competition and from greater resources.

Neither are the arguments on pleasure gardens or Rembrandts as clear-cut as the sceptics assume. The creation of new products or the public provision of existing ones can both help to solve the problem. One piece of land may be owned by a particular family but, in principle, it would be possible to raise the quality of all inhabited land. Land that one day is part of a slum or farmland could be converted into an area of outstanding beauty. Alternatively, parkland could be created so it can be enjoyed by more than one family. Similarly Rembrandts could be put in a museum or new works of arts could be created for people to enjoy.

As for the poor comparing their living standards against the rich, the practice is entirely rational. Since the wealthy tend to have more possessions, better technology and higher quality healthcare their lifestyles give an inkling of what can be achieved. The typical pattern is for the wealthy to be the first to adopt new types of material goods. No doubt the first people to own cars, computers, mobile phones and virtually every other type of good were generally rich rather than poor. As a result the rest of society could clearly see what was potentially possible.

Coveting what the rich have should not be dismissed as unhealthy envy. On the contrary, the fact people are dissatisfied with their lot can be seen as a healthy motive for change. Humanity has historically progressed by constantly trying to improve its position. As a result people are better off than ever before. In this sense unhappiness should be welcomed. It is a sign of ambition and a drive to progress rather than one of inherent misery. In contrast, the essentially conservative message of the happiness gurus is that people should be happy with their lot.

From here it should be clear that there is no paradox of prosperity. The rise of mass affluence is an incredibly positive development. It has bolstered the quality of people’s lives enormously. But there never was any guarantee that such progress would bring happiness. One of the most positive qualities of human beings is that they often want more than they have got. They typically want the lives of their children and grandchildren to be better than their own. The growth sceptics would have us stay where we are or even retreat to living a life of lower living standards.

If popular prosperity is such a positive development it begs the question of why it is so widely questioned by the sceptics. I have already discussed the key factors in a previous essay on spiked on growth scepticism (13). However, some of the main points bear re-examination.

One of the most important is the decline in the rate of economic growth in the developed world. The idea that growth should be a key national priority was only prevalent from the late 1940s to the late 1960s (14). Before that the emphasis was on ensuring economic stability following the experience of the great depression of the 1930s and the Second World War. From the 1970s onwards the benefits of affluence were increasingly called into question as economic growth began to slow. During the 1950s and 1960s the steady rise in living standards had bolstered the legitimacy of both the American and British states. But as growth faltered in the 1970s, and unemployment surged, it became harder for the economy to deliver such benefits consistently.

Another factor was the defeat of the left and the demise of 1960s radicalism. As the left was defeated from the 1970s onwards it became increasingly susceptible to anti-growth and environmentalist ideas. In addition, the 1960s counter-culture increasingly took on an anti-consumerist and ecological outlook. The forces that, in the past, could be expected to fight for popular affluence became increasingly sceptical about economic growth.

These developments were bolstered from the 1980s onwards by a new set of factors. The end of the Cold War strengthened the idea that there is no alternative to the market. Progress was widely discredited as an idea. Striving to realise the human potential was increasingly seen as creating problems rather than being a worthwhile goal.

In addition, society has become increasingly anxious about risk-taking. Social atomisation and the breakdown of traditional institutions have created an intense risk aversion (15). There is a growing fear of the potential dangers that the future holds.

These last two factors are important as they also help explain a growing fear of the future. What the growth sceptics identify as a lack of happiness can, at least in part, be more accurately described as social pessimism. There is no longer a sense that the future can be better than the present. On the contrary, potentially positive developments, such as technological or scientific advance, are routinely viewed with foreboding. Under such circumstances, it is no wonder that survey data sometimes appears to indicate that people feel miserable. The happiness pundits themselves have taken on the idea that, at least in material terms, the future cannot be better than the present.

The fact that the sceptics are wrong on the supposed paradox of affluence should not be dismissed as simply an academic error. On the contrary, their views and the policies they often advocate have at least two sets of dangerous consequences.

First, society as a whole, and the poor in particular, suffer as a result of assaults on prosperity. Although such attacks may be pitched as criticisms of the rich it is the mass of society that benefits most from rising wealth (16). The wealthy already largely enjoy the advantages of living an affluent lifestyle. In contrast, the rest of us still have a lot to gain from living in a more prosperous society.

Second, the pursuit of happiness as a social goal – as opposed to being a personal matter – opens the way to authoritarian policies. It is a short jump to conclude that if we are not happy then the government must somehow ‘correct’ our thinking. The authorities increasingly takes on a therapeutic role where its sees it sees it as necessary to manage people’s emotions. Regulating individual behaviour becomes one of the central missions of government (17)

So not only is there no ‘paradox of prosperity’ but pursuing happiness as a social goal is also likely to make us worse off. It downplays the economic growth that could hugely enhance people’s lives while inviting the authorities to regulate our emotional affairs. It should be up to individuals to decide if they want to pursue happiness as one of their personal goals. For society, the goal of greater economic growth, leading to an increase in popular prosperity, is a worthy one to follow.

Daniel Ben-Ami’s website can be found at www.danielbenami.com.

(1) The term ‘affluenza’ is so popular that at least three books and two documentaries have used it in their titles. Originally the term was used in two PBS documentaries: Affluenza (1996) and Escape from Affluenza (1998). The follow-up book was John De Graaf, David Wann, Thomas H. Naylor Affluenza: The All-Consuming Epidemic (Berrett-Koehler 2001). More recent books are Clive Hamilton and Richard Denniss – Affluenza: when too much is never enough (Allen & Unwin 2005) and Oliver James Affluenza (Vermilion 2007). Robert H Frank Luxury Fever (Princeton 1999) also compares the quest for wealth to a virus and an addiction.

(2) This point is made by Will Wilkinson on his website

(3) Richard Easterlin ‘Does Economic Growth Improve the Human Lot?’ in Paul A David and Melvin W Reder (eds) Nations and Households in Economic Growth (Academic Press 1974)

(4) Richard Layard, Happiness (Allen Lane 2005), p3

(5) Layard, p34. Gregg Easterbrook in The Progress Paradox (Random House 2003), p170 quotes a figure of only $10,000.

(6) Michael Savage, If you’re happy and you know it …

(7) For a useful review of Lomborg’s book see John Gillott, The Skeptical Environmentalist, spiked, 10 September 2001

(8) See Phil Mullan Ageing: the future is affordable, 15 September 2004

(9) Fred Hirsch, Social limits to growth (Twentieth Century Fund 1976), chapter 3

(10) Hirsch, p20.

(11) Hirsch, p41.

(12) For example, Robert Frank argues this point in chapter eight of Luxury Fever (Princeton 1999). However, it can be traced back to at least 1899 in Thorstein Veblen’s The Theory of the Leisure Class where he has a chapter on ‘pecuniary emulation’ (the chapter is available here)

(13) Daniel Ben-Ami, Who’s afraid of economic growth, 4 May 2006

(14) See Robert M Collins, More: The Politics of Economic Growth in Postwar America (Oxford 2000)

(15) See Frank Furedi, Culture of Fear (Continuum 2002)

(16) See, for example, Daniel Ben-Ami, What’s behind the case of the ‘NatWest Three’?, 11 July 2006

(17) See Frank Furedi Why the ‘politics of happiness’ makes me mad, 23 May 2006 and We need teachers, not amateur therapists, 11 July 2006

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