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October 15, 2005
My judgement was that Johan Norberg did not deal with the environmental objection to capitalism very well in his John Bonython Lecture. I referred to his response to the environmental objection here.
However, Andrew Norton over at Catallaxy is impressed. He sees substance as well as style. Of course, no effort is made to probe for substance, other than to say that Norberg is 'using the subjective well-being and cognitive psychology literature to defend liberal societies in ways that I had not seen before.' The Murdoch Press love Norberg.
Let us continue to probe Norberg's substance in relation to the way that he deals with another objection to capitalism in his defence of liberalism and capitalism lecture at the Centre for Independent Studies. This is the happiness objection. It acknowledges that capitalism has proven its value when it comes to wealth creation and prosperity, but it is then argued that prosperity does not necessarily make us happy nor increase the quality of life.
This objection makes sense to us in our everyday lives----is intuitively plausible. We can and do increase our wealth by working longer and harder and so can spent the money we earn fr our efforts to buy ipods, digital cameras, clothes and holidays. But we do so by working longer hours and under conditions of greater amounts of stress. Consequently we spend less time with family and friends. Our bodies can suffer because we become run down and so we are more likely to become sick. Ill health means unhappiness. So increased wealth does not mean greater happiness. This is an argument that has legs, just like the environmental one.
Norberg says that the happiness argument has been popularised by the British economist Richard Layard. He highlights the paradox here:
There is a paradox at the heart of our civilisation. Individuals want more income. Yet, as society has got richer, people have not become happier. Over the last 50 years we have got better homes, more clothes, longer holidays, and above all better health. Yet surveys show clearly that happiness has not increased in either the US, Japan, continental Europe or Britain.
Layard is advocating a happiness-based approach to public policy, and should form an important part of a social democratic agenda that is based on the new social science.
Norberg says that the happiness argument goes something like this:
Economic growth will not contribute to more happiness, because we are most interested in our relative position. The fact that someone else earns a higher income ---which makes them happy---makes others less happy, which forces them to work harder to retain their relative position. In the end we are all richer, but we are no more happy than before, since we cannot all be richer than other people. In other words, a better future will not result in a better future.
Norberg should say a wealthier future need not result in a happier future or a better quality of life, rather than 'a better future will not result in a better future.' The latter statement is a distortion of the happiness argument. However, he does interpret Layard's point about the rrole of norms in assessing happiness well. Layard says:
Two things are driving up the norm with which people compare their incomes. One is the income which they themselves have experienced ---which habituates them to the higher standard of living. And the other is the income which others get, and which they try to rival or outdo.
We do make these kind of judgements in our everyday lives.
How does Norberg respond to this argument?
He says:
You wouldn't have that sense of joy and happiness in the first place if you didn't have nice things to look forward to, interesting dinners and nice parties, for example. Is't it possible that the same goes for wealth? The fact that growth does not increase happiness much does not mean that it is useless---- it might be the fact that growth continues that makes it possible for us to continue to believe in a better future, and to continue experiencing such high levels of happiness.
It is true that we do need a certain amount of money or income to be able to lead a joyous and happy life. Note how Norberg concedes the main point: that 'that growth does not increase happiness much does not mean...' then pulls the switch by saying that does not mean that growth is useless. But who says that growth is useless? That is a distortion of the happiness argument, is it not? Happiness is not being equated with poverty at all. The key point is that income is earned by the sacrifice of time with your family and friends.
Norberg sidesteps this family work contradiction through turning to hope in progress. The problem with the happiness argument he say is that it undermines hope in progress :
From surveys we know that hope correlates strongly with happiness. If you want to meet a happy European, try someone who thinks that his personal situation will be better in five years from now. And we see the same when we compare Americans to Europeans.... In poor and badly governed countries entire societies suffer from hopelessness. You have few opportunities, no hope that tomorrow will be a better day. Belief in the future grows when poor countries begin to experience growth, when markets open up and incomes increase. That could help explain why happiness reached high levels in the West after the Second World War . With economies growing rapidly, people began to think that their children would enjoy a better life than they had.
Raising taxes to discourage work, and reduce economic growth would be a way of cutting off that progress.
Does the happiness argument destroy hope for a better life? A better life today in Australia is generally judged in terms of quality of life--downsizing work to allow more time for family and friends. Norberg reduces better to incomes increasing and economic growqth and so evades the point about quality of life.
Norberg evades as he does not substantively engage with the main point of the happiness argument. He is doing the same as he did with the environmental argument.
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