Copyright – Policy
For centuries, philosophers and poets have tried to understand what happiness is, and what might contribute to it. In recent decades, scientists have started to come up with the answers. Happiness is electrical activity in the left front part of the brain, and it comes from getting married, getting friends, getting rich, and avoiding communism.
At least, that’s part of the answer the scholars have given us in a theoretical field that is growing by the minute. There is a constant stream of theories and studies about human wellbeing and happiness, often translated into policy suggestions.
The British economist Richard Layard has written one of the most celebrated works about this, Happiness : Lessons from a New Science (London: Allen Lane, 2005). His specific point is that growth in the rich countries since the 1950s has not contributed to more happiness, and that this has a number of explanations. Because money has diminishing returns, we get used to higher incomes, and need even more to keep our old levels of happiness. Since we attach a lot of importance to our relative position, the fact that someone else earns a higher income (which makes them happy), makes others less happy. Getting rich is a negative externality—‘pollution’, as Layard calls it. It forces others to work harder to retain their relative position, but when they do, they get used to it, and end up no happier than they used to be. To stop this ‘hedonic treadmill’ we should increase taxes, discourage hard work, and slow down mobility and restructuring, to give us more time to the things that really make us happier—family, friends and reading Layard’s books.
Wealth and happiness
It is a simplification to say that growth does not contribute to happiness. In fact, one of the few things there is a consensus about in this very young field of science is that money does buy happiness. There is an extremely strong correlation between wealth and happiness. Low-income countries report low levels of happiness, middle-income countries report middle levels and high-income countries report high levels.
What the researchers say, though, is that this correlation levels off at a national income of about $10,000 a year. After $20.000, Layard says, ‘additional income is not associated with extra happiness’ (p. 33). The economist Richard Easterlin presented this surprising conclusion in a study about Japan. Since the 1950s, income in Japan increased almost 10-fold, but the Japanese are no happier today than they were then. 
This is the most highlighted finding from the research. But in fact, it is yet to be proven. The fact that a higher income level does not translate into higher happiness does not mean that growth doesn’t. What we do know is that there is a big jump in reported wellbeing when countries move from about $5,000 to $15,000 a year. And this is consistent with a much more dynamic interpretation than Easterlin’s and Layard’s.
Happiness and hope
From surveys we know that a lack of hope and opportunity correlates strongly with unhappiness. If you are looking for happy Europeans, try someone who thinks that his present situation is better than it was 5 years ago, or, even better, someone who thinks that his situation will be better in 5 years from now. If you want to meet a happy Australian, ask someone who thinks that people like themselves have a good chance of improving their standard of living.  In poor and badly governed countries entire societies suffer from hopelessness. If you are an average individual you have few opportunities, no conviction that what you do affects your position, no hope that tomorrow will be a better day. You expect little, and you get it.
We also know that a system in which individuals had few opportunities to improve their lives, communism, is disastrous to wellbeing. A lot has been made of the fact that post-communist countries reported lower happiness levels immediately after the fall of communism—hardly surprising since national instability is detrimental to happiness.
Less attention has been drawn to the fact that communist countries were much more miserable than other countries before the fall. Ronald Inglehart’s World Values Project made two studies in communist countries in the early 1980s, Hungary and a representative region of the Soviet Union, Tambov Oblast. The lack of freedom and growth in these countries were not compensated for by higher degrees of reported wellbeing. On the contrary, they reported lower happiness than any industrialised country, and were far more miserable than other countries on the same income levels. Even in countries like India, Bangladesh and Turkey, people reported higher wellbeing than the Soviets. 
Belief in the future grows when poor countries begin to experience growth, when markets open up, when incomes increase and people’s decisions begin to affect their place in society. For a recent example, look at Ireland. This country reported declining levels of life satisfaction between the early 1970s and the late 1980s. Ireland did not grow poorer during this time, but it had low growth and high unemployment. A lack of opportunities for the young led to high emigration.
In the 1990s things turned around. Rapid liberalisation, foreign investment and information technology doubled Irish GDP per capita in ten years. It became easy to start a business and to get a job. Unemployment fell from about 15 to 5% and emigrants returned. At the same time, reported levels of happiness grew rapidly, by about one point on a ten-point scale—a dramatic change for such a slow moving indicator. Today, Ireland is one of the world’s happiest countries. 
That could help explain why happiness reached high levels in the Western world after the Second World War, when they were close to the Irish situation. With economies growing rapidly, people began to think that their children would enjoy a better life than they had. The fact that economic growth since then has not increased happiness much from those levels does not mean that it is useless—it is the fact that growth has continued that makes it possible for us to continue to believe in the future, and to continue experiencing such high levels of happiness. The critics who think that they can conclude from the stability of happiness that zero-growth is preferable overlook that loss of income undermines happiness. And growth makes non-zero-sum games possible. Without it, whenever someone succeeds and gains, someone else has to fail.
But there is a much more basic problem with Layard’s interpretations of the happiness research. In fact, happiness hasn’t stopped increasing in the West. On the contrary, in most Western countries where we have surveys since 1975, happiness has increased.  Yes there are diminishing returns, but even at our standard of living, people do get happier when our societies grow richer, albeit at a slower rate. Japan seems to be the exception, not the rule.
Astonishingly, Layard admits this in the first footnote of the book, where he says about European surveys that ‘data since then  show a slight upward trend in happiness’ (p. 247). But in the rest of the book he completely ignores this fact, which undermines his whole argument. Instead he just keeps pretending that ‘for most types of people in the West, happiness has not increased since 1950’ (p. 29).
This argument also cannot explain why the most happy and satisfied places on earth are the ones that are most dynamic, individualist and wealthy: North America, Northern Europe and Australia. So why don’t we look there to find the secret of happiness? Even Layard admits that ‘we in the West are probably happier than any previous society’ (p. 235).
Happiness and freedom
One reason for this happiness is that a liberal and market-oriented society allows people freedom to choose. In the absence of authoritarian leaders and Layard-devotees forcing us to live the way they think is best for us, we can chose the kind of identity and lifestyle that suits us. And if we get used to valuing and choosing, we will get increasingly better at choosing to live, work and socialise in ways we like. In traditional societies, on the other hand, the individual has to adapt to pre-fabricated roles and demands.
Of course not everything in modern society suits everybody, but freedom also means the freedom to say no. If you don’t think you get happier by hard work and mobility, just skip it. A survey showed that 48% of Americans had, in the last five years, reduced their working hours, declined promotion, lowered their material expectations or moved to a quieter place.  Fast-food or slow-food, no logo or pro logo? In a liberal society, you decide.
So why should the government have to discourage us from hard work and mobility? Layard only presents indirect correlations to prove that these things are harmful. For example, he says working hard undermines the family and moving to a new neighbourhood lowers trust and increases crime, and since we know that family breakdown, lack of trust and crime are bad for wellbeing we should avoid this. But that does not follow, since there are other benefits to working as much as you want and moving to a place you prefer, which might compensate for these risks. Unless Layard and others manage to establish a direct link between work/mobility and unhappiness, this argument is bogus. 
Happiness and activity
In fact, high levels of happiness are reported from people with active lifestyles and who work a lot. It seems like evolution has given us a human nature that enjoys intellectual exercise, just like our bodies appreciate physical exercise. This is not really surprising, since we developed as hunter-gatherers, where individuals had to make constant choices in complex and constantly changing environments. If you think that this sounds like a night out, or like a day at work, you’re not so far off.
This might be the way we can save Layard’s and others’ observation that money as such isn’t the meaning of life. It isn’t. A classic mystery in the happiness studies is that lottery winners are not much happier than the rest of the population. It’s not just the money that makes high-earners happier than low-earners—more important is their way of life—being active, being creative, and experiencing control of your life. So it’s one up for Aristotle, who explained that happiness is not a destination, but a way of travelling.
The psychologist Mihaly Csikszentmihalyi captured this with his surprising observation that people asked to record when they experience happiness and joy reported much more happiness while working than in their spare time with their families. It turned out that people experienced most satisfaction when they were creative, when they were absorbed by an activity and felt that it was both challenging and possible to deal with. If I am asked to write an article on a too complicated subject that I don’t really master, I feel worry and anxiety, and if I am supposed to write about something that is too easy, I get bored. But when I strike the right balance, and write about something that is complicated, but I can handle it, then I experience the creative sensation Csikszentmihalyi calls ‘flow’. 
Apparently, a sense of competence and efficacy gives us happiness—a sense of being in control in complex situations. This is not surprising since it is difficult to imagine a trait that has helped mankind to survive and procreate better than this, but the implications are interesting.
Working life offers a lot of opportunities for flow, since it most often provides us with a system of challenges, incentives and feedback that makes us feel that we are in control, that there is a meaning to our actions. This can be compared with spare time that often is spent in front of the television. This is why human beings often consciously make their spare time more ‘complicated’ by reading difficult books, playing games or by cooking strange, new dishes. Just watch how children invent rules when playing. It makes the play more challenging—and more fun. That is why we try to learn more about complex subjects, and why we try to make simple and monotonous jobs more demanding, for example by timing ourselves.
Happiness and the welfare state
This desire for challenge helps to explain why it does not seem like the growth of the welfare state has increased human happiness. This was the finding of a series of studies by one of the most respected happiness researchers, the Dutch professor Ruut Veenhoven. He started out by looking for the correlation between social security and wellbeing he thought existed, to argue against economists who claimed that the welfare state was bad for the economy:
‘Against that loss at a material level I hoped to set the gain in psychological wellbeing. The result was not what I had expected, however. There proved not to be any wellbeing surplus’. 
Even though redistributive states have created more equal access to resources and welfare services (which create more happiness, ceteris paribus), the benefit is undermined by the fact that we are given this without working for it ourselves. Veenhoven’s results show that redistribution has not even managed to create a more equal distribution of happiness. In effect, the welfare state makes the beneficiary a lottery winner. The resources received do not make the welfare recipient more active or in control—perhaps the opposite—and with adaptation to the new resources, happiness is no higher than before.
If happiness comes from a sense of competence and efficacy, the welfare state is worse than a lottery. If the welfare state does what it is supposed to do, abolish problems and risks and guarantee a certain material result whatever we do, then it deprives us of many of our challenges and our responsibilities. That actions have consequences, both rewards and punishments, is not just good because it helps us make better decisions, it is also important because it gives us the sense of control. Without this direct feedback our sense of hopelessness and frustration grows.
Research tells us that optimism works.  People who think that they are in control of their lives go on to be more successful than others, whereas those who indulge in victimisation and think that someone else is to blame for their problems are most often proven right in their pessimism. Creating the paternalist institutions that Layard and others propose would be a way of depriving us of freedom, and the sense of control, and therefore probably also of happiness.
Government cannot give us happiness
A government that says it wants to make us happy misses the obvious fact that a government can’t give us happiness, it can only give us the right to pursue happiness—because happiness is what we get when we are in control and assume responsibility ourselves. A way of travelling, not a destination.
In other words, the conclusion of the French 19 th century liberal Benjamin Constant still stands:
‘The holders of authority…are so ready to spare us all sort of troubles, except those of obeying and paying! They will say to us: “what, in the end, is the aim of your efforts, the motive of your labors, the object of all your hopes? Is it not happiness? Well, leave this happiness to us and we shall give it to you.” No, Sirs, we must not leave it to them. No matter how touching such a tender commitment may be, let us ask the authorities to keep within their limits. Let them confine themselves to being just. We shall assume the responsibility of being happy for ourselves’. 
Johan Norberg will the give the 2005 CIS John Bonython Lecture in Sydney on 11 October, to be repeated in Auckland on 13 October. He works for the Timbro think-tank in Stockholm, and is the author of the best-selling book In Defence of Global Capitalism. His weblog can be found at www.johannorberg.net
 Richard Easterlin: ‘Does Economic Growth Improve the Human Lot? Some Empirical Evidence’, in P. A. David & M. W. Reder (Eds.), Nations and Households in Economic Growth (New York: Academic Press, 1974)
 Eurobarometer, Report number 53 (Brussels: European Commission, Oct 2000), chap. 1; Rachel Gibson, et al. The Australian Survey of Social Attitudes, 2003. Canberra: Australian Social Science Data Archives, The Australian National University.
 Ronald Inglehart & Hans-Dieter Klingemann, ‘Genes, Culture, Democracy, and Happiness’, in E Diener & M Suh (Eds.): Culture and Subjective Well-Being (Cambridge: MIT Press, 2000)
 World Database of Happiness. http://www2.eur.nl/fsw/research/happiness
 Michael R. Hagerty & Ruut Veenhoven, ‘Wealth and Happiness Revisited’, Social Indicators Research, 64 (2003). This also includes the US, which Layard denies.
 Robert Fogel, The Escape from Hunger and Premature Death, 1700-2100 (New York: Cambridge University Press, 2004), p. 72
 As pointed out by Jan Arild Snoen in ‘ Lykkeligere som sosialdemokrater?’, article on Civita’s website, 2005-06-13. http://www.civita.no/civ.php?mod=content&id=1
 Mihaly Csikszentmihalyi, Flow: The Psychology of Optimal Experience (New York: Harper Perennial, 1991)
 Ruut Veenhoven, ‘Wellbeing in the Welfare State’, Journal for Comparative Policy Analysis, 2 (2000), p. 3. See also Piet Ouweneel, ‘Social Security and Well-being of the Unemployed in 42 countries’, Journal of Happiness Studies, 3 (2002), which shows that the level of benefits does not buffer effects of unemployment, and Charles Murray’s In Pursuit of Happiness and Good Government (New York: Simon & Schuster, 1988)
 See for example Barbara Fredrickson, ‘What good are positive emotions?’, Review of General Psychology, 2, (1998).
 Benjamin Constant, ‘The Liberty of the Ancients Compared to that of the Moderns’, speech delivered in 1816. http://www.uark.edu/depts/comminfo/cambridge/ancients.html