Happiness and economic growth

I have an article in today’s Crikey on happiness and the economy (it is over the fold).

Happy, happy talk: What to think about the economy?

Crikey, 8th June 2007

Economics professor Joshua Gans writes:

Pop open the champagne, Australia’s economic growth is accelerating. 3.8% growth in output this past year, higher than the previous three years.

The boom continues, unemployment and inflation remain low, and the Australian dollar is at highs not seen for 15 years or more. And the polls suggest that this will not help the Government much, if at all, in the upcoming election.

Yet the mood from media commentary and, perhaps, office water-cooler talk doesn’t quite reflect the party. Now this is not uncommon. Harvard’s Daniel Gilbert in his recent book Stumbling on Happiness says that this is pretty much par for the course.

It is not really clear what makes people happy but it seems clear that it is not what you think – economic prosperity, stable marriage, bringing up children – and it is clear that people have a bad time assessing their own happiness. I have written elsewhere that this is pretty worrying for those interested in economic policy. What should we target if the goal is happiness and the usual suspects of a “good” economy, don’t do the trick?

All this reminds me of Tim and Debbie. You may not recall them but they were the star attraction on Australia, You’re Standing in It (a TV skit show of the 1980s). I remembered (and this is going back 23 years so it has always stuck with me) a particular exchange on “whether the ‘haves’ were really ‘happy’.” Thanks to the wonders of the net I have the exact exchange:

DEBBIE: What’s wrong is that you don’t realise that it’s not you that’s, um, destitute, right. It’s the so-called ‘haves’ of this world who are destitute.

TIM: I know.

DEBBIE: Spiritually destitute. Right. While someone such as you who has a really secure position in the unemployment industry, right, um, should view your dole cheque, right, not as a source of social insecurity, but as a ticket to spiritual awareness.

TIM: I do, I do, I do.

DEBBIE: Like, I really feel, um, I really feel sorry for the so-called haves, with their jacuzzis, and their inground swimming pools, and their Doncaster mansions, um, their Mercs and their Porsches, their Christian Diors and their Christian Barnards. Like, are they really happy. Like, I ask you, are they really happy?

TIM: Well they look pretty happy to me Debbie. Like, the other day, right, like I saw this amazing guy in a Mercedes-Benz type situation, right. And he had this amazing glamorous blond model-type person in the Mercedes-Benz situation, and they were towing a yacht, and they both looked really happy.

There is a sense here of “what are you going to do?” No one is really going to pull back on our traditional economic targets. May as well have more even if it isn’t clear what people want.

But there is just one more aspect to all of this: people are canny in thinking and worrying about when the luck may run out. Long booms occur, but they end. In this sense, Kevin Rudd’s current angle that “the time to mend the roof is when the sun is still shining” is likely to play well.

Rudd has turned the economic and now resource boom into political opportunity. Everything is on the theme of not resting on one’s laurels. The skills shortage, broadband (much as I don’t like the specific policy) and, of course, the environment.

All of these play to voters who have learnt to save for the future and not shortchange their children; ironically, a traditional Liberal Party theme. Rudd is asking them to do just that.

It is a good simple message.