Don't keep up with the Joneses

Once a nation has filled its larders is there any point in getting richer? Prof. Andrew Oswald on ho

In espousing quality of life for his nation, French President Nicolas Sarkozy is rare. Most politicians think economic growth is what makes a nation happier.

"Britain is today experiencing the longest period of sustained economic growth since the year 1701 – and we are determined to maintain it," began Gordon Brown, then chancellor of the exchequer, in the first sentence of his 2005 Budget speech.

Now prime minister, he has gone on to act as though he still does believe that growth is vital. Yet Nicolas Sarkozy is right and Gordon Brown is wrong.

Today there is much statistical and laboratory evidence in favour of the following simple fact: once a country has filled its larders there is no point in that nation trying to become richer.

First, surveys show that the industrialised nations have not become happier over time. Random samples of UK citizens today report the same degree of psychological wellbeing and satisfaction with their lives as did their (poorer) parents and grandparents.

In the US, happiness has fallen over time. Strikingly, and for reasons we do not completely understand, white American women are markedly less happy than were their mothers.

Second, using more formal measures of mental health, rates of depression in a country like the UK have increased over the last couple of decades.

Third, measured levels of stress at work seem to have risen.

Fourth, suicide statistics paint a picture that is often consistent with such patterns. In the US, even though real income levels have risen six-fold, the per capita suicide rate is the same as in the year 1900 (though in the UK, more encouragingly, the suicide rate has fallen in the last century).

Fifth, climate change is another reason why we should turn away from fast economic growth as the ideal to be pursued.

Some of the world’s most creative academics have followed the seminal work of economics professor Richard Easterlin in California and have come up with evidence on why growth does not work.

One reason is that humans are creatures of comparison. Research last year showed that happiness levels depend inversely on the earnings levels of a person’s neighbours. Prosperity next door makes you dissatisfied. It is relative income that matters: when everyone in a society gets wealthier, average wellbeing stays the same. There is a kind of giant neutralization.

A further reason is adaptation. Experiences wear off. A joint intellectual effort by psychologists and economists has got to the bottom of the way that human beings adapt to good and bad events. There is still disagreement about details, but some researchers believe that there is close to complete adaptation to rises in income. Such hedonic flexibility also works downwards.

Those who become disabled recover half of their happiness by three or four years later. Yet economics textbooks still ignore such ‘habituation’.

A final reason is, as Daniel Gilbert at Harvard has shown, that human beings are bad at forecasting what will make them happy.

In laboratory settings, people systematically choose the wrong things for themselves.

Yet surely, it might be argued, what about skiing holidays, power showers, televised football matches, fancy wristwatches, car travel for all – are these not compelling evidence for the long arm of growth? Yes they are, but we need these because Mr and Mrs Jones have them, not because they make an intrinsic difference.

Economists’ faith in the value of growth is now diminishing. That is a good thing. I believe that in the long run these (still strange) ideas are unstoppable. The reason is straightforward: they are supported by the data.

Andrew Oswald began working on happiness data in the early 1990s. His current work lies at the borders of economics, psychology and medicine.