Creating unhappiness, creating growth

"Keep your electric eye on me, babe
put your raygun to my head..."

Continuing from our last post re Stefano Bartolini's paper.

Bartolini’s model connects work, happiness and savings by hypothesizing that growth is a matter of exploiting two negative externalities, of which he concentrates on two types: “positional ones, and those which reduce the availability of free goods as final or intermediate goods.” In essence, that the promise of the affluence which is supposed to have been brought about by greater labor productivity and, especially, the increase in human capital, has not been borne out for reasons that are germane to the system itself. The system generates both an image of happiness and a pandemic of unhappiness. Bartolini wants to know why the savings rate does not effect the quantity of labor, why, that is, the amount of time spent working keeps going up, and why the satisfaction with one’s life is unaffected by increases over a certain amount of wealth. The latter begs the question that Geddes asks the John Houston character, the millionaire, in Chinatown: what more can you eat? How much better can you dress?

“The capacity of the hypothesis that relative income matters to explain the empirical
anomalies of growth theory should be intuitive. Individuals are induced to work hard
and to accumulate much by positional competition. The fact that the position of
people with constant incomes worsens if others increase their incomes is a powerful
incentive for the former to be interested in money.6 But, a general increase in income which leaves the relative positions unchanged cannot improve general well-being. In an economy of this kind the well-being of everyone cannot improve by definition.

Hence the hypothesis of negative positional externalities is consistent with
explanation of the happiness paradox. Positional negative externalities may be the
tertium movens which explains the empirical anomalies of growth theory.”

In a footnote, Bartolini explains those positional goods:

“The main precursors of the idea that relative position matters are Veblen 1899/1934 and Hirsh 1976. According to Hirsh, well-being in the rich economies depends increasingly on positional goods. The clearest definition of pure positional good has been provided by Pagano 1999, according to whom consumption by an individual of a positive amount of a positional good involves the consumption of an equal negative amount by someone else. Examples of pure positional goods are power, status, prestige. This definition implies that increased consumption of a positional good by someone produces a negative externality on someone else.”

While the notion of positional competition and measurement of wealth relative to position is not new, Bartolini’s second negative externality is much less explored:

“According to this approach, the theoretical and empirical difficulties of growth theory are due to the fact that it fails to consider that well-being and productive capacity depend largely on goods that are not purchased in the market but are furnished by the social and natural environment. The growth process generates extensive negative externalities which reduce the capacity of the environment to furnish such goods. These negative externalities may be the tertium movens of growth given the capacity of the market to supply costly substitutes for the diminishing free goods. If agents can purchase substitutes for free resources they will react to the decline in their well-being or in their productive capacity by increasing their use of goods purchased in the market. Negative externalities force individuals have increasingly to rely on private goods in order to prevent a decline in their wellbeing or productive capacity. In this way they contribute to an increase in output. This feeds back into the negative externalities, giving rise to a further diminution in free goods to which agents react by increasing output, and so on.”

A simple example of this comes to mind: the cost of a highway. A highway presents an obstacle to travelers without cars of a rare type: it is as if the state had imported high mountains into an area. The traveler, to get around auto-intended roads, is strongly inclined to get an auto.

Now, here is the bit that has so much relevance to the current election in France – but as much relevance to the past seven years of the moronic inferno in the States.

“The idea behind GASP (Growth As Substitution Process) models is that one way to motivate people to accumulate money is to create a society in which increasingly less can be obtained for free; a society in which opportunities to acquire well-being in ways which do not pass through the market become increasingly scarce, and in which well-being can therefore only be purchased.

According to this approach, the theory of growth based on accumulation and
technical progress is unable to explain the paradox of happiness because it tells only part of the story of growth – the story, that is, in which goods are luxury goods for one generation, standard goods for the next, and absolute necessities for the one after that. The history of economic growth is obviously full of examples of this process. But the other side of this story is that of free goods which become scarce and costly ones for the next generation and luxury goods for the one after that. Urbanization is widely associated with phenomena of this kind. A world in which silence, clean air, swimming in clean seas or rivers, or pleasant strolls become the privilege of uncontaminated places and tropical paradises is a world which tends to spend considerable resources to evade the unliveable environments that it has constructed. The periodic mass migrations known as summer holidays that one observes in the rich countries, or the fact that tourism from the rich countries has become an important resource for many poor ones, may not be indicative of higher living standards but rather a response to a deterioration in the quality of life.”

And finally, my last quote from Bartolini – although this rich essay has a lot of things LI will mine later:

“… in GASP models, the inability of growth to improve happiness derives from
an institutional problem, and not a biological or cultural one. The price system does
not receive signals about the importance of fundamental needs which do not pass
through the market. Individuals are unable to control resources crucial for their
happiness. The fact that money does not buy happiness stems neither from biology nor from culture; money is unable to buy happiness amid a pattern of growth with
excessively high social and environmental costs.”

Now, if I were to criticize Bartolini, it would probably be on the happiness decline. I am not sure that he is right that happiness is on the decline, so much as the composition of happiness has changed in way that are disastrous for our human relationships. But that would be another story for another time.