The economics of human happiness

(Part I)

Today, more and more economists are showing interest in empirical research on human happiness. Among other reasons, this has been prompted by a rude awakening to the fact that their favorite tool of measuring economic progress, i.e. Gross Domestic Product (GDP) is not necessarily directly correlated with human happiness. In fact, there are theories which claim that after a certain level is reached, higher GDP may spell greater unhappiness. Also, especially in a country like the Philippines in which there is so much inequality in the distribution of income, higher national income may just mean greater misery among the poor who get poorer as the rich get richer with the rising GDP. In 2009, the then President of France Nicolas Sarkozy published a report on new measurements of human welfare to complement the usual GDP reports. His contemporary Britain Prime Minister David Cameron established the Office for National Statistics to keep tab on the nation’s state of happiness. The United Nations itself has designated an annual International Day of Happiness.

What do social scientists know about the correlation between income and happiness? As summarized in an article that appeared in the Financial Times entitled “In Pursuit of Happiness,” by John McDermott, the first serious empirical research on this topic was done by US economist Richard Easterlin who published in 1974 a paper that asked “Does Economic Growth Improve the Human Lot?” Working on a sample of countries all over the world, he arrived at what is now called the “Easterlin paradox.” In any one country, at any point of time, his research showed that richer people are on average happier than poorer people. He, however, also discovered that as countries and people achieve higher levels of GDP, their levels of reported happiness do not show signs of improving. That is why there is a paradox. This should make policy makers reconsider their exclusive focus on attaining higher levels of GDP as the end all and be all of development efforts.

The pioneering research of Easterlin led to more studies in other fields of the social sciences. In “Happiness: Lessons from a New Science,” Richard Layard, a professor at the London School of Economics, proposed seven areas that could explain the paradox and that should be the focus of policy makers. These are family relationships, friends, employment, financial situation, health, personal freedom and “personal values.” Layard does not dismiss money as a source of happiness. As a labor economist, he stresses the misery caused by unemployment. There are other economists who have questioned the “Easterlin paradox” and have also presented data that showed there is no satiation point as GDP increases, although it may take more income to encourage a given unit of life satisfaction. Among these doubting Thomases are Betsey Stevenson and Justin Wolfer, economists at the University of Michigan, who argued that the Easterlin paradox collapses once new data are crunched.

Instinctively, however, I would support the Easterlin paradox and focus especially on family relations, friends, employment and “personal values” as other explanatory variables of human happiness that are not directly correlated with the increase in income. The Philippines usually ranks high in international measures of happiness together with such less developed countries like Bhutan. Filipinos, in surveys after surveys on happiness, always refer to their families as the greatest source of human happiness. The same can be said about how friendship in Filipino culture is a very important source of human gratification. What I would like to discuss in greater detail is employment as a source of human happiness.

Let me cite here the trail blazing work of a Filipino professor of business ethics at the University of Navarre in Pamplona, Spain. In his book “Happiness and Virtue Ethics in Business,” Dr. Alejo Jose G. Sison draws on the latest research in economics and psychology as well as Aristotelian virtue ethics to show why happiness is the ultimate value proposition for business. In the chapter in which he deals with the relationship between work and happiness, he explains how work can be a two-faced Janus that detracts from and contributes to happiness at the same time. He discovers how the loss of work exerts a strong downward pressure not only on the happiness of individuals, but also on the other members of society who may even continue working. He attributes this to two kinds of causes, some psychological or individual, and other others, social. These causes can affect people differently, depending on demographic facts such as sex, age, education and so forth.

He also examines the importance of job satisfaction for general wellbeing. Although work conditions are essential to happiness, they are not a substitute for the sense of autonomy, mastery, and purpose that individuals experience while working. In other words, intrinsic motivation (e.g., self-fulfillment, achievement, service to others) outweighs extrinsic motivation (salaries, fringe benefits, physical working conditions) in workplace satisfaction. Empirical studies reveal that while extrinsic motivation may be sufficient for purely mechanical or routine work, this does not apply to creative or intellectual work, which requires intrinsic motivation. The managers of workers in the BPO-IT industry must keep in mind that they cannot consider the work done by their employees as purely mechanical or routine in nature. There is always the intellectual and creative part even among call center agents, not to mention those who are doing knowledge process outsourcing. Dr. Sison actually notes that under certain conditions, extrinsic motivation may even expel intrinsic motivation. One of the highest forms of intrinsic motivation is that which Christian anthropology teaches: that human work is the means of sanctification, of “being perfect as the Heavenly Father is perfect.” This can fall under what Richard Layard referred to as “personal values.”

It is clear from these reflections on the responsibility of the business manager to foster happiness among workers that the ongoing focus on happiness studies should not put all the burden on government planners and policy makers. We cannot blame government people when they depend too much on such macroeconomic measures as GDP, full employment or even inflation figures as proxy variables for human happiness. However valid the Easterlin paradox may be, it is still undeniable that the vast majority of human beings would require an increase in the amount of goods and services available to them for each one to attain a minimum of material decency and comfort required for human happiness and even human virtue. In fact, St. Thomas Aquinas famously said that one cannot even begin to think of virtue if he is starving. To put it differently, a minimum amount of “having” is a pre-condition to “being.” An indispensable step in promoting human happiness is the abolition of dehumanizing poverty among the masses. (To be continued)

For comments, my email address is bernardo.villegas@uap.asia.