Secret Ways : Character Building

One reasonable way of thinking about the most fundamental goal of international economic development is to increase the level of human happiness in all countries, and to reduce the degree of inequality of happiness within and across countries. But, as Aristotle asked several millennia ago, what is happiness? And how can we measure it, either in a given individual or in a population? Utilitarians and economists chose to avoid the problem of measuring subjective happiness, and the associated problem of comparing utilities across persons, by substituting preference satisfaction for subjective happiness. And worries about the challenges of measuring subjective happiness led philosophers like John Rawls and economists like Amartya Sen to prefer to focus on the objective prerequisites of life satisfaction -- primary goods, in the case of Rawls, and capabilities and functionings, in the case of Sen.

And yet the idea of happiness, or life satisfaction, is too important to dispense with. New efforts have been made to develop survey tools and methods that permit assessment of the average level of life satisfaction for groups of people in different countries. Among others Jeffrey Sachs has played a lead role in conceptualizing and furthering this project. The result is a series of World Happiness Reports, beginning in 2012 (link), which can be seen as a counterpart to the World Development Reports (link) and the Human Development Reports (link). Here are some orienting thoughts from Jeffrey Sachs's introductory essay in the 2012 report.

Most people agree that societies should foster the happiness of their citizens. The U.S. Founding Fathers recognized the inalienable right to the pursuit of happiness. British philosophers talked about the greatest good for the greatest number. Bhutan has famously adopted the goal of Gross National Happiness (GNH) rather than Gross National Product. China champions a harmonious society.

Yet most people probably believe that happiness is in the eye of the beholder, an individual�s choice, some- thing to be pursued individually rather than as a matter of national policy. Happiness seems far too subjective, too vague, to serve as a touchstone for a nation�s goals, much less its policy content. That indeed has been the traditional view. Yet the evidence is changing this view rapidly.

A generation of studies by psychologists, economists, pollsters, sociologists, and others has shown that happiness, though indeed a subjective experience, can be objectively measured, assessed, correlated with observable brain functions, and related to the characteristics of an individual and the society. Asking people whether they are happy, or satisfied with their lives, offers important information about the society. It can signal underlying crises or hidden strengths. It can suggest the need for change.

Such is the idea of the emerging scientific study of happiness, whether of individuals and the choices they make, or of entire societies and the reports of the citizenry regarding life satisfaction. The chapters ahead summarize the fascinating and emerging story of these studies. They report on the two broad measurements of happiness: the ups and downs of daily emotions, and an individual�s overall evaluation of life. The former is sometimes called �affective happiness,� and the latter �evaluative happiness.� (6)

Sachs reports that the research team preparing the ground for a World Happiness Report finds that life satisfaction is affected by a number of intangibles -- for example, "community trust, mental and physical health, and the quality of governance and rule of law" (7). The contributors emphasize that GNP per capita is a component, but not the most important component, of variations in life satisfaction across countries and regions.

What has always been challenging in prior discussions of promoting happiness is the problem of measurement. How do we assess an individual's level of happiness or satisfaction? And how do we assess the level of these goods for a population or group? The second large task, once the measurement problem has been addressed, is to uncover the social factors that account for variations in satisfaction and happiness levels. This problem is a more familiar one, since it can be treated using epidemiological and statistical tools to identify the factors most strongly correlated with positive or negative variations in satisfaction levels.

The World Happiness project relies on value-survey instruments to measure population life satisfaction. Existing surveys include the Gallup World Poll, the World Values Survey, and the European Social Survey and European Values Survey. The primary instrument used in the 2012 report is the Gallup World Poll (GWP). GWP uses a 0-10 scale and asks adults to place their current quality of life on this scale (the Cantril ladder).

In the Gallup World Poll respondents are asked (using fresh annual samples of 1,000 respondents aged 15 or over in each of more than 150 countries) to evaluate the quality of their lives on an 11-point ladder scale running from 0 to 10, with the bottom rung of the ladder (0) being the worst possible life for them and 10 being the best possible. (11) 

Here are distributions across the Cantril Ladder for the world and for several regions:




As the researchers recognize, there is a serious question here of how to calibrate and interpret the responses offered by thousands of Brazilians, Finns, and Thais for this question. What justifies us in thinking that a respondents' ratings of 5 in Brazil and Thailand mean that Brazilians and Thais are about equally happy? Similarly, what justifies us in thinking that a 0 ("worst possible life I can imagine") means the same in the two countries? Hypothetically, if a Brazilian can imagine a quality of life that includes arbitrary incarceration and torture, whereas a Canadian cannot, doesn't this imply that the Canadian's score of 5 reflects a higher level of absolute life satisfaction than the Brazilian? Intuitively it seems that possibilities like these (cultural or circumstantial differences in worst and best life circumstances in different countries) imply that cross-national comparisons of satisfaction levels based on this kind of survey are suspect.

Here is an OECD research report that directly addresses some of the issues raised by the life satisfaction survey methodology; link. This report focuses on several methodological issues, including this comment on the effects introduced by alternative question wording:

In contrast, Helliwell [one of the authors of the 2012 report] and Putnam (2004) examined the determinants of responses to both a global happiness and a life satisfaction question in a very large international data set (N > 83 500), drawn from the World Values Survey, the US Benchmark Survey and a comparable Canadian survey. They found that, although the main pattern of results did not differ greatly between the two measures, the life satisfaction question showed a stronger relationship with a variety of social indicators (e.g. trust, unemployment) than did the happiness question. However, in this work happiness was measured on a four-point scale and life satisfaction was measured on a ten-point scale; it is thus not clear that question wording, rather than scale length, produced this difference. (70)

Helliwell and Wang respond to this concern about question wording in the report:

The bottom line of our comparisons among life evaluations is that when life satisfaction, happiness and ladder questions are asked about life as a whole, they tell very similar stories about the likely sources of a good life. The information base for these comparisons is still growing, however, so there may be some systematic differences that appear in larger samples. (15)

Helliwell and Wang also address the questions of reliability (consistency across measurements of the same variable at different times) and validity (accurate correspondence to the unobservable variable under scrutiny). Their strongest case for the validity of these survey-based attempts at measurement of satisfaction is the fact that it is possible to demonstrate that variations in life satisfaction measures are largely correlated with a small number of factors that are plausibly relevant to the creation of life satisfaction.

As will be shown in the next chapter, more than three-quarters of the cross-country differences in national average measures of happiness can be explained by variables already known through experimental and other evidence to be important. (17)

Perhaps more credible than international comparisons are within-country comparisons of satisfaction levels. We might feel more confident in thinking that Canadians share a conceptual space of worst and best outcomes with each other, and this shared framework means that their assessments of their personal situations along the Cantrel ladder will be comparable. But even here, it seems likely that there are cultural and circumstantial differences within a country that might lead to the same kinds of inconsistencies. Are Brazilian favela dwellers likely to identify the same worst and best outcomes as residents of the elite neighborhood of Botafogo? Helliwell and Wang make a brief reply to this kind of concern (19), but more needs to be said.

Capitalism is one particular configuration of the economic institutions that define production and consumption in a society. It involves private ownership of firms and resources, and a system of wage labor through which individuals compete for jobs within the context of a labor market. In its nature it creates positions of substantial power for owners of capital, and generally little power for owners of labor power -- workers. In theory capitalism can be joined with both democratic and authoritarian systems of government -- for example, France (democratic) and Argentina 1970 (military dictatorship). (Here is an earlier post on alternative capitalisms; link.)

As Marx himself noted, capitalism brought a number of powerful and emancipatory changes into the world. But it is plain that there are substantial deficiencies in our contemporary political economy, from the point of view of the great majority of society. For example:

• Rising inequalities of income and wealth
• Disproportionate power of corporations in political and economic life
• Persistence of racial and ethnic segregation and discrimination 
• Slow rates of social mobility
• Pervasive inequalities of opportunity
• Overwhelming influence of money in electoral politics
• Inability to address the causes of climate change
• Inability of the state to effectively regulate products and processes to ensure health and safety
• Manipulation of culture and values for the sake of profit

What kinds of institutional changes might we imagine for our current political economy that do a better job of satisfying the demands of justice and human wellbeing?

A number of philosophers, political scientists, and economists have addressed the question of how to envision a more just form of capitalism. Kathleen Thelen considers the prospects for an "egalitarian capitalism" (Varieties of Liberalization and the New Politics of Social Solidarity ; link); Jon Elster had an important contribution to make on the question of alternatives to capitalism (Alternatives to Capitalism; link); and John Rawls put forward a view of a preferable alternative to capitalism, which he referred to as a property-owning democracy (O'Neill and Williamson, Property-Owning Democracy: Rawls and Beyond; link).

So what might capitalism 2.0 look like if we want a genuinely fair and progressive society in the 21st century? Several features seem clear.

• Something like decentralized markets in labor and capital seem unavoidable in a large modern society. So the 21st-century economy will be a market economy.
• Rawls is right that extreme inequalities of property ownership lead to unacceptable inequalities of political participation and human capability fulfillment. So the 21st century will need to find effective ways of distributing wealth and income more broadly.
• Market mechanisms generally leave some disadvantaged sub-populations behind. A key goal of the 21st century state must be to find effective ways of improving the prerequisites of opportunity for disadvantaged groups. This means that a substantial equality of availability and access to education, nutrition, housing, and other components of quality of life need to be secured by the state.
• Existing market institutions do not automatically guarantee fair equality of opportunity. So the political economy of capitalism 2.0 will need to use public resources and authority to ensure equality of opportunity for all citizens.

What kinds of political and economic institutions would serve to advance these social goals?

One approach that is gaining international attention is the idea of a universal basic income for all citizens. Belgian philosopher Philippe van Parijs makes a powerful case for the need for universal basic income (link) in the world economy we now face. Here is his definition in the Boston Review article:

By universal basic income I mean an income paid by a government, at a uniform level and at regular intervals, to each adult member of society. The grant is paid, and its level is fixed, irrespective of whether the person is rich or poor, lives alone or with others, is willing to work or not. In most versions�certainly in mine�it is granted not only to citizens, but to all permanent residents. 

The UBI is called "basic" because it is something on which a person can safely count, a material foundation on which a life can firmly rest. Any other income�whether in cash or in kind, from work or savings, from the market or the state�can lawfully be added to it. On the other hand, nothing in the definition of UBI, as it is here understood, connects it to some notion of "basic needs." A UBI, as defined, can fall short of or exceed what is regarded as necessary to a decent existence. (link)

The map makes clear the strong association between county income and educational attainment, which implies in turn that children born into the wrong zip code have substantially lower likelihood of attaining high-quality educational success. A more just society would show little variation with respect to educational attainment, even when it also shows substantial variation in per-capita incomes across counties. Achieving comparable levels of educational attainment across rich and poor counties requires a substantial public investment in schools, teachers, and educational resources.

Another determinant of equality of opportunity is universal access to quality healthcare. Poor health affects both current quality of life and future productivity; so when poor people are in circumstances in which they cannot afford or gain access to high-quality healthcare, their current and future life prospects are at risk.

All of these ideas about a more just capitalism require resources; and those resources can only come from public finance, or taxation. The wealth of a society is a joint product which the market allocates privately. Taxation is the mechanism through which the benefits of social cooperation extend more fully to all members of society. It is through taxation that a capitalist society has the potential for creating an environment with high levels of equality of opportunity for its citizens and high levels of quality of life for its population. The resulting political economy promises to be the foundation of a more equitable and productive society. (Here is a post on the moral basis for the extensive democratic state; link.)

Milanovic goes into substantial detail in explaining the elephant graph in this extensive lecture at Peterson Institute for International Economics (link). The discussion of the slide occurs at 7:45.

Milanovic is one of the most expert analysts of economic inequalities anywhere, and Global Inequality is a contribution that anyone interested in inequalities will want to read.