Making sure that more is not less

The subject for this column suggested itself, and I did not resist. I was at the Zanabazar Museum at an exhibition of paintings by A.Ulziijavkhlan and her husband T.Ulziijargal. The talented couple follow a somewhat similar style and  the dominant impression was of ordinary domestic scenes, seen through a gentle haze and muted tones. I was repeatedly drawn to an oil on canvas showing a young adult, or maybe adult, woman, barefoot and baretorsoed, standing in blue denim shorts in indeterminate limbo, absently watching a butterfly hovering near her outstetched left hand, with plans of landing there. I cannot explain why I immediately thought of something Henry David Thoreau had written. I have since checked and the exact quote is: “Happiness is like a butterfly: the more you chase it, the more it will elude you, but if you turn your attention to other things, it will come and sit softly on your shoulder.”

And this is when I knew this month I shall write on  the economics of happiness. This is a  comparatively new field of study, where practitioners of the dismal science explore what economics and social science say about personal happiness, and what those ideas imply both for economic policymaking and the choices each of us make all the time. It may be said to have begun with Richard Easterlin’s analysis “Does Economic Growth Improve the Human Lot? Some Empirical Evidence” (1974).

Seeking to ascertain if people in the richer countries are indeed happier than those elsewhere, Easterlin found that more wealthy people in any given country do claim to be happier with their lives than do poorer people in the same country. This legitimises economists’ usual focus on the material things of life,  emphasising the promotion of economic growth. The material standard of living of any country’s average citizens grows higher as it gets richer. This applies to individuals, too. The more they earn, the better they live.

Even those who reject the primacy of  more and better goods and services as the criterion of happiness would confess to the need for adequate medical care, good nutrition and sanitation, workplace safety, a clean environment, more leisure time, less physically exhausting and more interesting work, higher education levels, greater ability to travel, and more funding for arts and culture. I write these at random, and there could be many more such demands, but in all cases we shall find that richer countries have more resources to devote to these, and thus to keep their people happy.
However, two other things Easterlin found did not fit the common economic framework. These were the heady days of growth and several countries were getting steadily richer, way beyond the level where basic needs such as for food and shelter were met, but this did not mean that the percentage of people claiming to be happier was increasing as a country’s GDP rose. Average incomes grew and more people owned more consumer durables but the fraction of the population in a country admitting to be happy remained more or less the same as before, and few thought they were happier than they were when the previous survey had been taken. The other anomaly was that, once a basic sustenance level had been reached and sustained, people in such countries did not report being all that much happier than people in lower-income countries.

This was quickly dubbed the Easterlin paradox, in a way validating what Adam Smith had said, “The mind of every man, in a longer or shorter time, returns to its natural and usual state of tranquillity. In prosperity, after a certain time, it falls back to that state; in adversity, after a certain time, it rises up to it.”

Easterlin’s results and their underlying ‘moral’ have been consistently contested, but it is now generally accepted that the increase in happiness flowing from greater wealth is no more than moderate. Wealth and income certainly do contribute to happiness and life satisfaction, but there are several other factors similarly important.

What Easterlin posited, taking an economic perspective, is two-pronged: that people’s happiness depends less on their absolute wealth than on their wealth compared with others around them; and that one’s sense of how well off one is economically, depends a great deal on one’s expectations and aspirations, which in turn are largely formed by the community in which one lives. Both happy herders and miserable millionaires are facts of life and I have read of a study by psychologist Ed Diener and his colleagues which found that the happiness scores of the richest Americans, in fact, are only slightly higher than those of Masai tribesmen, a semi-nomadic African people who live without electricity or running water.

Those who assert the importance of the rich array of factors that contribute to individual and societal welfare may be said to be led by Amartya Sen, who is, incidentally but contributing much to my happiness, the only Nobel laureate whom I know personally. Accepting his nomination to be co-chairman (along with fellow Nobelist in economics, Joseph Stiglitz) of the Commission on the Measurement of Economic Performance and Social Progress, established in 2008 by French President Nicolas Sarkozy to develop an alternative to the GDP, he said, “The GDP is very misleading and something must be done to get better measures of well-being.” The idea is to develop metrics that can be compared across countries and over time, like GDP, but that emphasise more than income.

The Mongolian media are full of politicians’ and analysts’ assertions of how rich the country will be once its mineral resources start earning fair revenue. Any investors’ conference talks  of a manifold rise in GDP in the decade ahead. The figures projected in MNT are stunning if only because few of us are sure how much exactly a trillion is.  Maybe, taking advantage of the fact that in many ways the Mongolian economy and society are starting with a clean slate and do not carry much baggage from the past, the country will, in anticipation of its days of economic security and the thrill of having a new standard of living,  start cultivating the flexibility to accept change with equanimity, and to focus its efforts on achieving goals at the limit of, but still within, its reach.

GDP (and its nearly identical twin, the GNP) must not by itself be the final objective of policy. It simply adds together all monetary expenditures and does not care one whit about what it is we are consuming, about how equitably distributed a country’s wealth might be, nor whether the money we spend is ours or is borrowed from future generations. The GDP measures economic activity in a manner that is fundamentally misleading. Mark Anielski has commented that by counting the depletion of natural resources as current income rather than as the liquidation of assets, the GDP “violates both basic accounting principles and common sense”.

Let me end by paraphrasing something I read as I think the analogy is specially apt here in Mongolia. The person whose name I don’t recall says money is a little like beer. Most people like it, but more is not necessarily better. A beer might improve your mood, but drinking 10 beers not only does not increase your happiness tenfold, it might not increase it at all. It is up to every Mongolian, in as much as one can hold one’s own against peer pressure and community imperatives, to make sure that the country having more does not end up in its people losing much.