Children dressed as dancing devils smile while participating in a mass to receive the blessing of the "Santisimo Sacramento del Altar" in San Francisco de Yare.YURI CORTEZ/AFP/Getty Images
John Rapley is an author and academic who divides his time among London, Johannesburg and Ottawa. His books include Why Empires Fall (Yale University Press, 2023) and Twilight of the Money Gods (Simon and Schuster, 2017).
Is all economic growth the same?
You might think so. With Canada’s per capita GDP declining, politicians of all stripes have made restoring growth their top priority. And most economists would endorse that goal, since the standard utility-maximizing framework sees any increase in aggregate income producing a similar increase in aggregate utility – which is to say, an increase in the things which make us happy.
Yet as I noted in a recent column, the link between income and happiness is surprisingly opaque. Raising a person’s income augments his or her general happiness, but only to a point, while the effect diminishes as one climbs the pay scale.
In other words, if you want to raise society’s general happiness, you’d do better to target income increases at poor people than rich ones. But even then, despite there being some overlap between the richest countries on the planet and those which report themselves to be the happiest, the established links between income and happiness aren’t very strong.
So researchers have turned their attention to finding out what does make us happy, and have come up with a rather eclectic mix of findings. Living in neighbourhoods which are aesthetically appealing and have lots of green space has been correlated with happiness. So too has having good parents. Extroverts are generally found to be happier than neurotics.
Meanwhile people who attend religious services on a regular basis are on average found to be happier than others, the key reason being the sense of a supportive community people get in religious congregations. And one of the most intriguing findings that keeps popping up in studies is that conservatives tend to be happier than liberals. But there’s probably no prize for the discovery that people are happiest in climates with mild winters and pleasant summers – no doubt the reason the Mediterranean remains the planet’s most popular holiday destination.
As well, on closer inspection, some of the apparent links between income and happiness turn out to be complicated. For instance, it’s well-established that losing one’s job is associated with a discernible increase in unhappiness. But while the obvious explanation would be that it’s because your income goes down, reducing your overall utility, it turns out that the non-pecuniary impact of job loss considerably outweighs the pecuniary loss.
What makes people so miserable when they join the unemployment line is less loss of income than loss of status, which is compounded by weakened social bonds: Not only do you feel less good about yourself when you lose your job, but you can’t treat loved ones or date as much, increasing your sense of social isolation and loneliness. Meanwhile your money worries can strain your relationships.
And that points to a common strand that surfaces in all these studies. It is that we humans are social animals.
Most of the things that give us pleasure ultimately involve some form of interaction with other people, whether family, friends or colleagues. Money matters to the extent that it enhances our ability to enjoy those things – whether it is spending money on or with people, enjoying the health that enables us to do more things with them,or obtaining their appreciation and admiration with status goods or the things we can do for them.
So it’s not money itself which makes us happier, but what money enables us to do. A lot of the connection between rich countries and average happiness appears to come down to richer countries being able to provide their citizens with more of the support, like health care and unemployment insurance, that reduces overall anxiety, and thus enables us to relax more and enjoy life. That may be why Americans are on average less happy than Europeans, despite being richer: Their welfare state is less kind.
The corollary to this is that policy measures to enhance our income but which would weaken some of those social supports – like tax cuts which require cuts in public services, or market reforms that reduce security of employment in the hopes of stirring more job creation – may possibly work at cross purposes. We might earn more money, but not feel able to enjoy it.
Take it all together and the message to politicians might be that more important than economic growth per se is growth that facilitates human flourishing by fostering and preserving strong and stable communities, families and neighbourhoods. Equally, growth which in any way weakens those might not make us feel better off. In short, it’s not the Holy Grail, but at best a means to an end – and perhaps, sometimes, not even that.
Handle with care – that probably should be our approach to growth.
Opinion: Should we really be prioritizing economic growth? - The Globe and Mail
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