When God died, GDP took over
and economists became the new high priests. That has been the story of the last
century, with prophets from Hayek to Keynes. The "dismal science" -
economics - rules our lives and politics. So when one of the wizards of
economics breaks ranks spectacularly and rips away the curtain of his own
profession's mystique, it is time to take notice.
Lord (Richard) Layard, the LSE's director of the centre for economic
performance, has this week delivered three startling lectures which question the
supremacy of economics. It doesn't work. Economies grow, GDP swells, but once
above abject poverty, it makes no difference to citizens' well-being. What is
all this extra money for if it is now proved beyond doubt not to deliver greater
happiness, nationally or individually? Happiness has not risen in western
nations in the last 50 years, despite massive increases in wealth.
This sounds like the stuff of vicars, Greens and prophets of doom with
sandwich boards in Oxford Street. Yes, we've considered the lilies of the field
while getting on down to Dixons, humming "money can't buy me love" all
the way to the bank. Retail therapy feels good. So most of serious politics, and
thus our national life, revolves around cash, its getting and spending.
Layard is not the first to say this: there is a growing new scientific
movement studying happiness. Daniel Kahneman, the winner of this year's Nobel
Prize for economics - yes, economics - is best known for his work on hedonic
psychology. Suddenly the big question is being asked by those who spent their
lives on making and measuring money: what's it all for?
For doubters, he offers a wealth of hard scientific evidence. Neuroscience
has backed up social and psychological surveys: brain scans now prove that
people's reported happiness levels are remarkably accurate, as easy to measure
as decibels of noise. And people are no happier than they were.
Money does matter in various ways. People earning under around £10,000 are
measurably, permanently happier when paid more. It matters when people of any
income feel a drop from what they have become used to. But above all, money
makes people unhappy when they compare their own income with others'. Richer
people are happier - but not because of the absolute size of their wealth, but
because they have more than other people. But the wider the wealth gap, the
worse it harms the rest. Rivalry in income makes those left behind more
miserable that it confers extra happiness on the winners. In which case, he
suggests, the winners deserve to be taxed more on the "polluter pays"
principle: the rich are causing measurable unhappiness by getting out too far
ahead of the rest, without doing themselves much good.
In pursuit of money, working ever harder, we are, says Layard, on a
"hedonic treadmill" - a phrase that resonates with most of us. Right
across Europe people report more stress, harder work, greater fear of
insecurity, chasing elusive gains. The seven key factors now scientifically
established to affect happiness most are: mental health, satisfying and secure
work, a secure and loving private life, a safe community, freedom and moral
If politicians were to absorb this message - he delivered a version of this
at the Smith Institute inside No 11 last week - the political implications are
devastating. Virtually everything politicians can promise with any degree of
certainty, depends on money - more growth, higher GDP, more things. Once they
leave the terra firma of hard economics, they are in alarming territory.
Politicians are not priests or moral guides: since they are now treated with
(unjustified) contempt, they areunlikely to assume the mantle of the nation's
But imagine if they abandoned all other targets and adopted just the one - to
increase the sum of national felicity. Budget day would no longer be the big
event, it would instead be replaced with hedonic measurement day. Where would
they find quick wins? Layard suggests a great many.
As an employment economist, (chief architect of Labour's New Deal), at work
he calls for gentler management, less downsizing and squeezing of labour, more
security of tenure. Though he has recently called for Europeans to be tougher on
pushing people into work, since unemployment is a prime source of despair, once
in work he supports European-style employment protection, treating workers
better. He decries calls for more "labour mobility", which has
destroyed secure communities and separated families, contributing greatly to
unhappiness. "As we get richer, we could afford less unpleasant working
He is at his most caustic on mental health. Depression is largely curable
with drugs and therapy, but only a quarter of people get treatment. Mental
illness causes half of Britain's disability, but claims just 12% of resources.
Shifting money within the NHS would be a hedonic quick win. Education also makes
for happiness. He has more examples aplenty, and ends with a call for common
values, more trust.
Layard is hugely and wonderfully optimistic: his lectures are heady, even
hedonic, material. He is also strangely apolitical. There will be those who
shrug and say this research just goes to show that human nature is a constant,
never changes, people have always been happy or unhappy to the same degree.
Nothing works. Governments certainly don't deliver bliss, so let us all pursue
our own private paths as best we can. These people are called conservatives.
Optimists - or progressives like Layard, will see in this research a far
better road map to happiness, which lies in the common good. Happiness is easier
to find in collective things than in the short-lived pleasures of shopping. Here
is affirmed what the left always knew.
But what are beleaguered, well-intentioned Labour politicians to make of
this, confronted on every side by the shrill cries of the right and its press
against any tax rises, against all collective goods as "waste"?
Business bellows for more "flexibility" which destroys trust and se
curity at work, for fewer rights, more competition, less cooperation. Yet in
Layard's spiritual ending, there is common ground in his call for public
morality, self-sacrifice for the greater good, excoriating the selfishness of
individualism. He is Old Testament stern about the culture of endlessly pursuing
personal pleasure, regardless of the needs of others. He refers nostalgically to
wartime, when citizens accepted a drop in personal gratification for common
purpose, something so often praised by conservatives and yet resisted with every
fibre in peacetime. Layard is a necessary guru for our times, with a new moral
language for some good old sentiments.
· Richard Layard is currently writing a book on economics and
happiness. His lectures can be found at cep.lse.ac.uk