The current edition is the first translation into English from the original edition, published in German as, Geld macht doch glücklich: Wo die ökonomische Glücksforchung irrt (Schäffer-Poeschel Verlag, 2011).

As we can read in the authors’ Preface, the goal is that  “[i]t should be a thrilling book, entertaining to read but still reporting on the latest scientific developments” (p.ix) concerning happiness research. Though the book’s theme is an appealing one, after having read it, only the last expectation if fulfilled. The unequivocal exception is the book’s Appendix that is placed after its’ eleven chapters where the authors provide the reader with what we might call, an introduction to happiness research. We may infer from this that, though they thought that an introduction was necessary, they did not want to be too condescending with the reader (that could perhaps be a peer and therefore would gladly dismiss such introduction in the beginning) and they wanted that the literature review that they proceed to in the eleven chapters would take centre stage. Still, I consider that it would much benefit the common reader if the Appendix was a part one, or an introduction, since it would frame very successfully happiness research and, consequently, the eleven chapters that would follow.

Therefore, briefly, I start by discussing the content of the Appendix, where we can find a description of the context that motivates the existence of the book. In the transition to the twentieth century, we went from classical economics, to neoclassical economics, meaning, we went from a objective-value theory to a subjective-value theory (where the value of a good depends solely on the utility it generates and on its scarcity), and consequently, psychology became deeply involved in it. (p.157) We learn how the Scottish moral philosophy of Adam Smith, matured by psychology, was developed into an independence science by Pareto, who cuts economics off from psychology and sociology and introduces mathematical analysis. (p.160) The authors dwell on its advantages and disadvantages, describe the birth of game theory (back in 1944, devoted to the analysis of strategic interaction) and assess the recent neuroeconomics approach that aims to find out how do we take decision, which is closely connected with computation decision values.

         The authors’ central claim is that all of these approaches have blind spots that have been becoming more and more visible and where, before, neoclassical economics and normative theories composed the whole body in economics, now, psychology is having more ground again. Happiness research showed up back in the 1970s and it is, therefore, a discipline that can, according to the authors, come to play a big role in order to fill in the gaps. How? That’s the question the eleven chapters attempt to give an answer to.

         ON THE ESTERLIN PARADOX

          The main element to take center stage in this book is the Esterlin Paradox. To put it shortly, the Easterlin Paradox states: money does not make you happy. This means, that there is no positive correlation between GDP growth and average life satisfaction of the population. (p.22) Or, in other words, that there is an Income-happiness paradox. Some use the Esterlin Paradox as a main argument to show “that economic growth isn’t needed” (p.102) but for example, if a correlation between a longer live and a higher income exists than we should not put growth at risk.

The Esterlin Paradox is the central finding of the research of happiness into the economics of happiness, which began in the 1970s. For many years research tried to find out why did the paradox existed. But recently, the paradox started to be questioned to the point that many wonder if it really exists. (p.113) It is not consensual anymore. The authors’ thesis is that in order to go forward, the Esterlin Paradox, the pillar of the happiness research, has become an obstacle, and needs to be taken down and replaced by new methods and more accurate measurements that can make the research field truly develop.

         The book’s strategy to do so, is to start by addressing alternative indexes to the GDP that have become fashionable since happiness research showed up, but are not effective, though they play a bigger role now, in politics. (p.5,7) (A discussion on France’s Commision sur la Mesure de la Performance Économique et du Progrès Social, known in literature as the Stiglitz-Sen-Fitoussi Commision, back in 2008, takes place. p.77)

According to the authors, happiness research can be more effective than alternative indicators because it provides a set of tools that is not arbitrary because it obtains information on people’s life satisfaction by asking them about it directly. (p.6) Just like GDP [it] sums up total economic performance in one number. (p.7) Concerning this statement I fail to understand where is the ground that sustains it, since the level of manipulation that is possible in happiness research seems to be considerably higher than the one in the GDP.

The authors then proceed to describe and explain how the paradox disappears if we consider the role of relative positions (p.27), which plays no significant role in neoclassical economics (p.29). They do a review of literature since the mid the 1990s and assess the role of comparison and adaptation. They conclude that the paradox perhaps appeared, in the first place, because there was a measuring problem in empirical life-satisfaction. (p.34)

HAPPINESS RESEARCH AS A COMPLEMENT TOOL TO GDP

         In Chapters 4 and 5, respectively, the authors discuss the regularities in data sets for non-material causes (questioning if happiness innate, what role does an individual’s personality plays, a person’s values, intrinsic motivation, is being a materialist good or bad for happiness, health, age, marriage, children, divorce, death, social capital, the environment, personal and political freedom) and the actual value of material things that can easily be measured (unemployment, unemployment rate, inflation rate, income equality, pro social spending, education). Of particular interest is the authors’ defense of the positive contribution that happiness research can have when it comes to the environment (valuation of non-marketable goods) and education (that traditionally shows no particular results on why it is important to happiness). Happiness research, they claim, though is based on subjective matters, can be most effective where the GDP and other indicators are not: for example, in estimating the value of goods for which there are no market prices (public goods). (p.79)

         Because happiness research can be an alternative to indexes, an alternative to assess properly public goods (where neoclassical economics fails) it is therefore the essential tool to support the GDP. In order to move forward, and assume leadership in this role, the authors demand for a better methodology and better measurement in happiness research. For example, when we refer to happiness, important distinctions need to be made, in order to collect reliable data. We need to distinguish between emotional well-being, life-satisfaction and following Aristotle, “eudaimonia”, “which assumes that ‘true’ happiness begins at the moment it comes from the fulfilment of our ‘true’ needs.” (p.105) Next, we need to ask how does money relates to each of them? The authors claim that money does buy happiness. The question is: is that true to all three kinds of happiness?  (p.105) Or, in other words, as they conclude, “[m]oney makes you happy, but the strength of its effects varies (p.127) according to the kind of happiness you are referring to.

         It is confusing that the authors do not make a distinction between “economic prosperity” and “economic growth”, using both terms interchangeably, particularly since Tim Jackson’s publishing of “Prosperity Without Growth” (2009) which could perhaps contribute to clarify methodological issues concerning happiness research and parts of the discussions that take place in the book. All things considered, this book offers a state of the art discussion on a wide range of literature on happiness research and while it is very supportive of its field of research, and very optimist about its potential, it calls for an urgent restructuring; their main thesis that aims at taking the Easterlin Paradox out of the way is somewhat successful; what it is not quite clear is how exactly can happiness research be a better complement to the GDP than an index/ indexes or how can it provide solid arguments that support a more accurate measurement of public goods (a gap in neoclassical economy).

 

© 2015 Diana Soeiro

 

Diana Soeiro. Postdoctoral Research Fellow in Philosophy at NOVA Institute of Philosophy /IFILNOVA at Universidade Nova de Lisboa (Portugal). Updated information: www.linkedin.com/in/DianaSoeiro