WEBVTT NOTE The Trojan Horse of Happiness Research 1 00:00:00.000 --> 00:00:07.000 I'd be curious of how many of you have even heard of happiness research in the field of economics. 2 00:00:07.000 --> 00:00:12.000 It looks like about half, something like that. 3 00:00:12.000 --> 00:00:19.000 So I'm going to, you know, the Trojan horse of happiness research, I'm going to do 15 minutes for a bit of a critique. 4 00:00:19.000 --> 00:00:26.000 If you want to read survey articles, Bruno Frey has written several of them, F-R-E-Y, Bruno, 5 00:00:26.000 --> 00:00:29.600 One in the Journal of Economic Literature and in several other places. 6 00:00:29.600 --> 00:00:33.120 And so if you want to read up on this, that's where to go. 7 00:00:33.120 --> 00:00:41.920 And basically what it is, is that it comes from psychology that an economist started doing research 8 00:00:41.920 --> 00:00:49.440 based on surveys done by psychologists asking people, how happy are you on a scale of one to ten? 9 00:00:49.440 --> 00:00:55.840 And then, you know, doing it by income, whether you're employed or unemployed, 10 00:00:55.840 --> 00:01:02.480 whether you're married or unmarried, and it's become a huge industry for economists. 11 00:01:02.480 --> 00:01:10.120 I just read recently on the web that the British government is spending $300 or $3 million, 12 00:01:10.120 --> 00:01:16.680 the equivalent of $3 million, on a research program to measure happiness in England. 13 00:01:16.680 --> 00:01:22.040 And so that's a good way of a full employment program for economists. 14 00:01:22.040 --> 00:01:28.600 But after looking at some of the literature, and there's a huge literature, I think a lot 15 00:01:28.600 --> 00:01:32.320 of it is really insidious from my perspective. 16 00:01:32.320 --> 00:01:38.960 And one of the things that this literature does is it simply assumes that utility is 17 00:01:38.960 --> 00:01:42.320 cardinal and measurable. 18 00:01:42.320 --> 00:01:48.920 There's really no argument that is made, they simply say, we're going to ask people how 19 00:01:48.920 --> 00:01:55.640 how you feel on a scale of 1 to 10, and we're going to call that cardinal utility, and that's 20 00:01:55.640 --> 00:01:56.640 it. 21 00:01:56.640 --> 00:02:03.200 And the old debate over cardinal versus ordinal utility is over according to these people. 22 00:02:03.200 --> 00:02:10.200 Utility is measurable after all, and they do it based on opinion surveys, and they assume 23 00:02:10.200 --> 00:02:15.880 that the values expressed by the people who respond to the surveys are constant, which 24 00:02:15.880 --> 00:02:20.800 which of course they aren't, we change our minds about things, and they assume of course 25 00:02:20.800 --> 00:02:28.440 that the people who answer the surveys are telling the truth, which is not always necessarily 26 00:02:28.440 --> 00:02:29.440 true also. 27 00:02:29.440 --> 00:02:34.360 And I asked Bruno Frey about this a couple years ago, I was at a conference in Prague 28 00:02:34.360 --> 00:02:40.080 where he made a presentation, and I asked him this question about, you know, what is 29 00:02:40.080 --> 00:02:46.080 These are justifications for abandoning the age old practice of economists of relying on 30 00:02:46.080 --> 00:02:54.440 demonstrated preference rather than opinion surveys and his response was that GDP data 31 00:02:54.440 --> 00:03:03.880 are bad also, if my data are flawed so are GDP data and here's, I'm going to read one 32 00:03:03.880 --> 00:03:07.840 thing that Murray Rothbard said about this in his article called Toward a Reconstruction 33 00:03:07.840 --> 00:03:14.520 of Utility and Welfare Economics, one of the most absurd procedures based on a constancy 34 00:03:14.520 --> 00:03:19.840 assumption that is constant values, your values don't change, has been the attempt to arrive 35 00:03:19.840 --> 00:03:24.360 at a consumer's preference scale not through observed real action but through quizzing 36 00:03:24.360 --> 00:03:26.360 him by questionnaires. 37 00:03:26.360 --> 00:03:32.880 In vacuo, a few consumers are questioned at length on which abstract bundle of commodities 38 00:03:32.880 --> 00:03:36.120 they would prefer to another abstract bundle and so on. 39 00:03:36.120 --> 00:03:41.000 Not only does this suffer from the constancy error, no assurance can be attached to the 40 00:03:41.000 --> 00:03:46.860 mere questioning of people when they are not confronted with the choices in actual practice. 41 00:03:46.860 --> 00:03:51.080 Not only will a person's valuation differ when talking about them from when he's actually 42 00:03:51.080 --> 00:03:55.480 choosing, but there's also no guarantee that he's telling the truth. 43 00:03:55.480 --> 00:04:01.680 And so that's a very articulate explanation of why, up until this research came along, 44 00:04:01.680 --> 00:04:04.120 economists didn't use opinion surveys. 45 00:04:04.120 --> 00:04:09.760 We rely on demonstrated preference, but these people, these researchers have just thrown 46 00:04:09.760 --> 00:04:12.680 this out the window. 47 00:04:12.680 --> 00:04:17.640 Here's one statement from the Frye survey in the Journal of Economic Literature. 48 00:04:17.640 --> 00:04:24.400 He says, quote, happiness functions, they create happiness mathematical functions. 49 00:04:24.400 --> 00:04:26.000 Happiness is a function of income. 50 00:04:26.000 --> 00:04:30.320 Happiness is a function of whatever variable they want to measure. 51 00:04:30.320 --> 00:04:37.720 These functions have sometimes been looked at as the best existing approximation to a social welfare function. 52 00:04:37.720 --> 00:04:45.720 It seems that at long last, the so-far empirically empty social welfare maximization is given a new lease on life. 53 00:04:45.720 --> 00:04:54.120 And so they've resurrected the old social welfare function that, when I was in graduate school, back when the dinosaurs roamed the earth, 54 00:04:54.120 --> 00:05:02.000 I was taught why this is a bogus concept, that you can't aggregate utility in any way. 55 00:05:02.000 --> 00:05:09.720 But they claim to be able to aggregate social welfare now with these surveys. 56 00:05:09.720 --> 00:05:15.160 Another thing that is in this survey is that the literature, there are many articles that 57 00:05:15.160 --> 00:05:22.120 have come to this conclusion that income has increased dramatically since World War II 58 00:05:22.120 --> 00:05:28.840 in the capitalist, you know, more or less capitalist countries, but happiness has not. 59 00:05:28.840 --> 00:05:35.040 So people go to work every day, they start new businesses, they invent new products, 60 00:05:35.040 --> 00:05:39.120 and they keep doing that year after year after year, but it doesn't make them happy. 61 00:05:39.120 --> 00:05:40.760 But they keep doing it anyway. 62 00:05:40.760 --> 00:05:43.040 But that's what the statistics say. 63 00:05:43.040 --> 00:05:49.320 This is all, you know, highbrow econometric research that is used to arrive at these conclusions. 64 00:05:49.320 --> 00:05:53.620 They also resurrect interpersonal utility comparisons, because after all, if utility 65 00:05:53.620 --> 00:05:58.600 is measurable now with opinion surveys, you can compare. 66 00:05:58.600 --> 00:06:04.640 And so we can compare the utility that one person has over a dollar compared to another 67 00:06:04.640 --> 00:06:08.760 person based on what they say in these opinion surveys. 68 00:06:08.760 --> 00:06:15.560 And of course, that's one of the keystones of Austrian economics is the recognition that 69 00:06:15.560 --> 00:06:19.240 This is impossible to make interpersonal utility comparisons. 70 00:06:19.240 --> 00:06:21.920 Another conclusion of this research is this, 71 00:06:21.920 --> 00:06:25.000 and I'm quoting from the Frey article 72 00:06:25.000 --> 00:06:27.160 in the Journal of Economic Literature. 73 00:06:27.160 --> 00:06:30.440 Wealthier people impose a negative external effect 74 00:06:30.440 --> 00:06:33.560 on poorer people, but not vice versa. 75 00:06:34.720 --> 00:06:39.720 So wealthier people impose a negative externality 76 00:06:39.800 --> 00:06:43.320 on poorer people because they envy the wealthy. 77 00:06:43.320 --> 00:06:45.440 Envy is a negative externality, 78 00:06:45.440 --> 00:06:48.280 But according to the econometrics, 79 00:06:48.280 --> 00:06:52.280 the poor don't impose a negative externality on the rich. 80 00:06:52.280 --> 00:06:57.520 So I wrote in a margin here, so the welfare bums and loafers 81 00:06:57.520 --> 00:07:00.200 do not impose a negative effect on the people who 82 00:07:00.200 --> 00:07:01.800 pay for their welfare benefits. 83 00:07:05.160 --> 00:07:10.320 Keep in mind, this is all said after a blur of mathematics 84 00:07:10.320 --> 00:07:15.200 and endless regression equations in the academic journals. 85 00:07:15.200 --> 00:07:20.280 to give them the authority to say these things. 86 00:07:20.280 --> 00:07:23.400 Another conclusion, raising everybody's income 87 00:07:23.400 --> 00:07:26.440 does not increase everybody's happiness, 88 00:07:26.440 --> 00:07:31.640 but improving one's income in comparison to others does. 89 00:07:31.640 --> 00:07:34.880 So income redistribution increases everybody's 90 00:07:34.880 --> 00:07:36.480 happiness. 91 00:07:36.480 --> 00:07:40.440 But if everybody becomes wealthier at the same time, 92 00:07:40.440 --> 00:07:43.160 that doesn't increase everybody's happiness, 93 00:07:43.160 --> 00:07:46.600 Contrary to All Reality. 94 00:07:46.600 --> 00:07:52.680 Then another conclusion, and I'm going to quote again from Fry, 95 00:07:52.680 --> 00:07:55.680 the production of luxury goods such as expensive watches 96 00:07:55.680 --> 00:07:59.920 or yachts is a waste of productive resources 97 00:07:59.920 --> 00:08:04.120 because overall happiness is reduced. 98 00:08:04.120 --> 00:08:07.440 They conducted studies where people 99 00:08:07.440 --> 00:08:12.480 claim that they have a negative externality by the fact 100 00:08:12.480 --> 00:08:21.480 The fact that other people have Rolexes and yachts and they claim, and since you can compare utilities now, interpersonal utility comparison, 101 00:08:21.480 --> 00:08:30.480 they came to the conclusion that the diminished utility from the envy of the lower income people over the yachts and the watches 102 00:08:30.480 --> 00:08:36.480 overwhelms any benefit that the watch owners and the yacht owners have in terms of utility. 103 00:08:36.480 --> 00:08:42.480 Therefore, of course, why not tax away the wealth of the people who buy the yachts and the watches? 104 00:08:42.480 --> 00:08:48.480 The Phillips Curve is resurrected in this literature. 105 00:08:48.480 --> 00:09:01.480 Here's another quote. If unemployment rises by 5 percentage points, the inflation rate must decrease by 8.5 percentage points to keep the population equally satisfied. 106 00:09:01.480 --> 00:09:07.080 And so, well, that's what the Phillips Curve said, you know, the Phillips Curve trade-off 107 00:09:07.080 --> 00:09:12.000 between inflation and unemployment, but they have sort of a satisfaction curve based on 108 00:09:12.000 --> 00:09:15.040 the trade-off between inflation and unemployment. 109 00:09:15.040 --> 00:09:20.520 And so the Phillips Curve and Keynesianism is supported by this. 110 00:09:20.520 --> 00:09:24.240 Another conclusion, and I'm quoting from a survey article in the Journal of Economic 111 00:09:24.240 --> 00:09:30.040 Literature that surveys, you know, numerous articles that have come to these conclusions. 112 00:09:30.040 --> 00:09:35.240 So these quotes I'm reading are not just conclusions of one isolated article. 113 00:09:35.240 --> 00:09:39.440 This is a survey article and these are some of the main conclusions based on these hundreds 114 00:09:39.440 --> 00:09:43.720 of journal articles that have been written over 20 years. 115 00:09:43.720 --> 00:09:49.800 Welfare payments should be increased to compensate for larger family sizes so as to maintain 116 00:09:49.800 --> 00:09:52.740 the subjective well-being of the family. 117 00:09:52.740 --> 00:09:56.480 So welfare is not big enough. 118 00:09:56.480 --> 00:10:02.960 The fight for relative positions in society is socially wasteful. 119 00:10:02.960 --> 00:10:06.400 And the high income recipients as winners of these races 120 00:10:06.400 --> 00:10:08.360 should be more heavily taxed. 121 00:10:08.360 --> 00:10:09.800 That's a direct quote. 122 00:10:09.800 --> 00:10:15.040 And so people who aspire for excellence, entrepreneurs 123 00:10:15.040 --> 00:10:19.080 who have a hunger to invent something and be successful, 124 00:10:19.080 --> 00:10:21.200 it's a race. 125 00:10:21.200 --> 00:10:22.880 It's nothing more than a race. 126 00:10:22.880 --> 00:10:33.560 And in this quote I just read, these people should be taxed for doing that. 127 00:10:33.560 --> 00:10:38.040 John Kenneth Galbraith is held up as perhaps the founding father of happiness research 128 00:10:38.040 --> 00:10:44.360 because he wrote the book The Affluent Society in the 1960s in which he denigrated affluence. 129 00:10:44.360 --> 00:10:46.800 And that's what this research does. 130 00:10:46.800 --> 00:10:52.680 So you're probably getting the message of why I think this is insidious, this whole area of research. 131 00:10:52.680 --> 00:10:59.320 There are lots of, a lot of this research, there are, I ran across lots of really inane 132 00:10:59.320 --> 00:11:07.240 pseudo-scientific mumbo jumbo dressed up in mathematical equations and econometrics. 133 00:11:07.240 --> 00:11:14.920 And so you have page after page after page of math and then statistics and econometrics 134 00:11:14.920 --> 00:11:17.560 to arrive at the conclusion. 135 00:11:17.560 --> 00:11:23.960 And I wrote down maybe a dozen or so of these conclusions that come after all this pyrotechnic 136 00:11:23.960 --> 00:11:29.880 stuff in these journals, and so I'm going to read you some of these quotes. 137 00:11:29.880 --> 00:11:32.440 And this is true of a lot of mainstream economics, by the way. 138 00:11:32.440 --> 00:11:37.120 You could go to any economics journal and find things like this. 139 00:11:37.120 --> 00:11:41.240 Here's one, a point of brilliance. 140 00:11:41.240 --> 00:11:50.960 Persons with higher income have more opportunities to achieve what they desire. 141 00:11:50.960 --> 00:11:55.680 There is diminishing marginal utility with absolute income. 142 00:11:55.680 --> 00:12:04.640 British lottery winners reported higher mental well-being the following year. 143 00:12:04.640 --> 00:12:08.240 There is more to subjective well-being than just income level. 144 00:12:08.240 --> 00:12:18.240 That's a shock. On average, persons living in rich countries are happier than those living in poor countries. 145 00:12:18.240 --> 00:12:24.240 Happiness of unemployed persons is much lower than that of employed persons. 146 00:12:24.240 --> 00:12:29.240 Experiencing unemployment makes people very unhappy. 147 00:12:29.240 --> 00:12:34.240 It sounds like three-year-olds saying this. 148 00:12:34.240 --> 00:12:41.380 Bruno Frey might win the Nobel Prize for this someday, if Paul Krugman can win it. 149 00:12:41.380 --> 00:12:48.020 Freedom and happiness are positively related. Who would ever have thought that? 150 00:12:48.020 --> 00:12:54.720 Inflation lowers reported individual well-being. That makes some sense. 151 00:12:54.720 --> 00:13:00.320 And then the final thing is there's also a part of the literature. 152 00:13:00.320 --> 00:13:04.960 Professor Bruno Frey himself has been publishing in Public Choice for many years and so he 153 00:13:04.960 --> 00:13:11.680 has published some articles on the influence of federalism and democracy. 154 00:13:11.680 --> 00:13:16.800 He's from Switzerland so he's a big fan of direct democracy and of course he's done 155 00:13:16.800 --> 00:13:22.800 all these econometric studies showing that direct democracy creates happiness in Switzerland 156 00:13:22.800 --> 00:13:24.800 anyway. 157 00:13:24.800 --> 00:13:29.640 But the way I look at it is, I wrote down my note here, allowing the sheeple to vote 158 00:13:29.640 --> 00:13:36.400 What Makes Them Happy, and so he sort of makes generalizations about democracy and direct 159 00:13:36.400 --> 00:13:41.880 democracy per se, making people happy, but you have to take it into context of what sort 160 00:13:41.880 --> 00:13:45.760 of constitutional arrangements there are in a different country. 161 00:13:45.760 --> 00:13:52.080 You know, I remember the Soviets used to brag that they had 99% voter turnouts, and so they 162 00:13:52.080 --> 00:13:56.720 had a form of democracy there, and so there wasn't that much happiness. 163 00:13:56.720 --> 00:14:00.360 And so that part of the literature seems very incomplete. 164 00:14:00.360 --> 00:14:03.720 And that's about all I have time for, I think, for now. 165 00:14:03.720 --> 00:14:07.120 I wanted to explain to you why I think so-called happiness 166 00:14:07.120 --> 00:14:09.360 research really is a Trojan horse. 167 00:14:09.360 --> 00:14:10.360 And there's a lot of it. 168 00:14:10.360 --> 00:14:12.040 It's been out there for 20 years. 169 00:14:12.040 --> 00:14:15.280 And there are books written about it now. 170 00:14:15.280 --> 00:14:17.200 And then the final thing I'll mention 171 00:14:17.200 --> 00:14:21.680 is that I ran across an article on the web 172 00:14:21.680 --> 00:14:25.160 stating that the country of Brazil is, 173 00:14:25.160 --> 00:14:26.520 I'll just read you what it says. 174 00:14:26.520 --> 00:14:29.040 There's a bill before Brazil's Congress, 175 00:14:29.040 --> 00:14:31.560 which would insert the phrase pursuit of happiness 176 00:14:31.560 --> 00:14:35.440 into Article 6 of the Constitution, which states 177 00:14:35.440 --> 00:14:38.280 that education, health, food, work, housing, leisure, 178 00:14:38.280 --> 00:14:40.640 and security, among other issues, 179 00:14:40.640 --> 00:14:43.560 are the social rights of all citizens. 180 00:14:43.560 --> 00:14:46.040 And so that's one country where this 181 00:14:46.040 --> 00:14:49.840 is being used to sort of resurrect Franklin Roosevelt's 182 00:14:49.840 --> 00:14:54.360 economic Bill of Rights, right to housing, right to a job, 183 00:14:54.360 --> 00:15:04.360 and so forth, and I think that's where this is headed, and Bruno Frey would deny it, I asked him about that and he denies it, but it sure seems like it to me.