Just about everyone seems to be writing about happiness these days - even investment bankers. Deutsche Bank economist Stefan Bergheim analyses 22 rich countries, and comes up with four varieties of capitalism: the happy variety, the less happy variety (Germany, Spain, France, Belgium and Austria), the unhappy variety (Portugal, Italy and Greece), and the Far Eastern variety (Japan and Korea). So which countries benefit from happy capitalism? it's the usual suspects - the Scandinavians and the Anglo-saxons:
The happy variety of capitalism: Australia, Switzerland, Canada, the UK, the US, Denmark, Sweden, Norway and the Netherlands as well as (to a lesser degree) Finland and New Zealand have organised society and institutions in such a way that they provide the conditions that are important for human happiness.
Lest American or British readers get too excited, Bergheim adds a coda:
Over the last ten years it is above all the Irish, the Spanish and the Scandinavians that have succeeded in implementing considerable happiness-enhancing changes.
Bergheim's paper, The happy variety of capitalism: Characterised by an array of commonalities (PDF), identifies ten commonalities or ''indicators for a happy society" from a cluster analysis of these countries:
1. High degree of trust in fellow citizens
2. Low amount of corruption
3. Low unemployment
4. High level of education
5. High income
6. High employment rate of older people
7. Small shadow economy
8. Extensive economic freedom
9. Low employment protection
10. High birth rate
One can quibble about one or two, but the list seems broadly right. However it is notable that Bergheim glosses over child poverty and inequality of income and wealth. These show greater divergence between the Anglo-saxon and Scandinavian countries than his analysis suggests. Likewise gender equality, or measures of 'active citizenship' and political engagament.
The key lesson of much recent cross-national happiness research, and the recent debates about social Europe, is that there is more than one path to economic prosperity and to high levels of subjective well-being. One is the Scandinavian/Nordic model of social democratic capitalism - more recenly dubbed 'flexicurity'. The other is the Anglo-saxon model of liberal capitalism - the so-called 'Anglosphere'. They each have their pros and cons, but both are associated with low unemployment, robust economic growth, and above-average levels of happiness and life satisfaction.
UPDATE: The Economist blog, Free Exchange, is more sceptical about the paper, particularly its policy conclusions: That's enough happynomics
There's nothing new in the data: happiness correlates positively with wealth, education and trust, negatively with corruption and unemployment. But the conclusion is a touch unusual, coming from an investment bank. For governments:
Happiness and life satisfaction should be explicit policy objectives
Eeek. To do Deutsche the courtesy of taking its paper seriously, has it given any thought to what would follow? Governments telling us how happy we are, civil servants walking around with absurd smiles on their faces, public festivities day in day out, holidays for every trade and age. A favourite slogan of Stalinism, in the depths of the terror, held that "life is better and merrier than ever before".
No! Enough social engineering, even in the name of happiness! let me be miserable in my own way, that's what would make me happy.
Because there is so little of it going around?
Posted by: Lafayette | Saturday, June 02, 2007 at 04:15 PM
If happiness is so difficult to estimate, and if it is the absence of misery, then perhaps an idea of the http://www.miseryindex.us/indexbyyear.asp>Misery Index will indicate who much we should be happy?
Posted by: Lafayette | Saturday, June 02, 2007 at 04:22 PM
0. No political freedom (freedom is bad)
No wonder people hate economists.
Posted by: Laurent GUERBY | Sunday, June 03, 2007 at 02:17 PM
The Economist's reaction appears knee-jerk. Incorporating happiness as an over arching policy objective doesn't have anything to do with going civil servants walking around with absurd smiles on their faces; in my opinion, it is more about providing a framework for prioritising other objectives that all compete for the public purse.
Posted by: Caravaggio | Monday, June 04, 2007 at 12:59 PM
Can I suggest to read an interesting article written by M.Wolf ("Why progressive taxation is not the route to happiness") on The Financial Times published today, wed june 6 2007. It is a review of the "happiness: lesson form a new science" by Richard Layard an I find the conclusions not trivial.
Regards,
Alex
Posted by: Alex Castelli | Wednesday, June 06, 2007 at 10:06 AM
The FT article by Layard is pay-per-read.
How about this http://cep.lse.ac.uk/events/lectures/layard/RL030303.pdf>one? - free, gratis and for nothing. (Now, that IS happiness, isn't it? ; ^ )
Posted by: Lafayette | Wednesday, June 06, 2007 at 02:00 PM
Income inequality doesn't belong on the list, which reflects desired outcomes of price, quality, cost, and productivity. Income inequality in itself has little meaning. So, other factors need to be considered, e.g. aggregate utility, and creation (or quantity) and distribution (or access) of capital. Income inequality can be offset by many factors, e.g. women paying lower prices, because they're better shoppers. Political activism can be a positive or a negative. The goal should be to optimize an economy. So, for example, if the E.U. has high income and high unemployment, while China has low income and low unemployment, how will high income and low unemployment be achieved?
Posted by: Arthur Eckart | Wednesday, June 06, 2007 at 05:48 PM
Not on your list. On mine it is well worth placing.
Gross income inequality has proven to be a major menace to most societies in which it has been found to exist. It is kindling for societal tumult, which can easily become chaotic.
Given the embarrassing Gini-index for the US, I suggest that income inequality is very much worth mentioning in a Happiness Index.
Finally, what if we were to simplify the Happiness Index to just one parameter. Rather than trying to define what Happiness means and because it is subjective to each culture, why not simply define it as "the absence of misery".
Then, we go to Maslow's Hierarchy of Needs, and we measure each country on the basis of how it provides that first level - which (it seems to me) would be necessary to eradicate the objective condition of misery.
Whether people are "happy" or not, is too subjective a condition to truthfully depict. Amalgamating indices is interesting statistical analysis, but practicably dubious.
Posted by: Lafayette | Thursday, June 07, 2007 at 08:05 AM
Happiness is a culturally dependent variable because of its subjectivity. Some people in this world (Amazonian Indians) are quite happy with very, very little whilst American plutocrats can be miserable with far too much. In fact, the reasons for this diametric are well worth some sociological research.
The phenomenon (as I see it) is this: Some poor cultures can seem to content themselves with very little. Many "developed societies" also seem to learn a habit of dissatisfaction as they develop economically. That is, more of the same is never enough.
In fact, presume one did an experiment within a fairly primitive society. Presume that selected elements of that society were "allowed to earn more" and thus better themselves. Would they then remain as content as they were, or would they want even more? I suggest the latter would happen. Acquisition seems to become an addictive habit.
I suggest that we leave "happiness" to other researchers within the soft sciences (such as sociologists or psychologists) to figure out. The ball is in their court.
Posted by: Lafayette | Thursday, June 07, 2007 at 08:10 AM
Oh, bollocks.
There are enough Scandinavians pouring into southern Europe upon retirement to indicate the above is somewhat questionable. The Irish, curiously, are not a key factor in this internal EU immigration. And, of course, the Spaniards are already in the south of Europe.
How is it that the Irish do not seek a more favourable climate in such considerable numbers as do the Scandinavians? Let's ask them. I suspect it is due to "latent tribalism" (meaning strong group loyalty), such as, closer ties within the extended family.
Posted by: Lafayette | Thursday, June 07, 2007 at 09:54 AM
"There are enough Scandinavians pouring into southern Europe upon retirement to indicate the above is somewhat questionable "
Lafayette: what is "pouring"? (are there enough of us to "pour" anywhere) - and do you mean people who buy holiday homes and spend the winter there, or permanent emigrants?
Posted by: Suvi | Thursday, June 07, 2007 at 11:47 AM
Lafayette, retarding living standards through income equality will not increase happiness. So, income inequality doesn't belong on the list. If you want real income equality, then everyone in the world should earn or live on the same income. However, I doubt Europeans who receive money and benefits from higher income people will give most of their income and benefits to lower income people, e.g. billions of people who live on less than $3 a day. Too many Europeans don't understand or care about the trade-offs and immorality of income equality, and it won't optimize economies. However, I agree a "safety net" is needed. More equal incomes can make society or everyone poorer or lift all boats at a slower rate. Happiness is not subjective in economics. Maximizing utility (i.e. happiness or satisfaction) given constraints can be proved mathematically. Diminishing marginal utility, for example, is a real force.
Posted by: Arthur Eckart | Thursday, June 07, 2007 at 01:44 PM
Permanent immigrants. The Provence and Cote d'Azur is full of 'em.
The cost of living is cheaper than in Sweden, the medical attention is at least just as good, the climate ... well, no comparison whatsoever there.
Those who buy holiday homes do so with a perspective of retirement. I should know, I sold into that crowd. There is even a Swede in Monaco who gives/gave regular seminars in Stockholm and Copenhagen about how to become a "tax exile" in Monte Carlo. He's made a small fortune selling Monagesque real estate.
No, I'm not jealous. Well, damn, only a wee bit. ;^)
Posted by: Lafayette | Thursday, June 07, 2007 at 01:55 PM
Enough of this anti-leftist twaddle. It's not only troglodytic, but a reminder of the Cold War days when Reagan foisted the "Evil Empire" upon Americans.
Soooo boring.
Which demonstrates that AE knows little in the matter, as regards Europe. Look at the respective Gini-coefficients: US-40.8; EU-29.7. (Zero indicates perfect income equality, whilst 100 is perfect inequality.)
Income inequality in the US is one of the worst of any developed country. (Go http://en.wikipedia.org/wiki/List_of_countries_by_income_equality>here to see for yourself.)
Posted by: Lafayette | Thursday, June 07, 2007 at 02:27 PM
Lafayette, obviously, U.S. policies were more effective winning the Cold War than European policies. Income inequality is higher in the U.S. than in the E.U. However, U.S. per capita income is $10,000 higher. Also, U.S. prices are lower (given trade deficits, which mostly benefit lower income workers). Moreover, U.S. capital is more abundant (because of capital creation and trade policies, which also help lower income workers). The E.U. has a more equal society (i.e. equally poorer), along with a more sluggish economy.
Posted by: Arthur Eckart | Thursday, June 07, 2007 at 05:08 PM
"U.S. policies were more effective winning the Cold War than European policies"
In what way, Arthur?
" Income inequality is higher in the U.S. than in the E.U. However, U.S. per capita income is $10,000 higher"
Per capita yes, but they have a lot more people living in poverty, especially a lot more children. Since this is a 'happiness thread', would you like to explain how this makes them happier?
"The E.U. has ... a more sluggish economy"
Not true now, and not true always - at the moment, European growth figures are higher than those of the US. Are we reading the same numbers?
Posted by: Suvi | Thursday, June 07, 2007 at 08:16 PM
Suvi, the U.S. hard line and competitive policy towards the Soviets, which was unpopular and feared in Europe, help win the Cold War. You assume poverty is higher in the U.S. However, poverty is relative and the U.S. has a "safety net." For a large country, with a higher birth rate and higher immigration of poor, the U.S. has little poverty. It's remarkable the U.S. economy can expand, and outperform E.U. output over time, with huge negative net exports.
Posted by: Arthur Eckart | Friday, June 08, 2007 at 08:23 AM
"the U.S. hard line and competitive policy towards the Soviets, which was unpopular and feared in Europe, help win the Cold War"
Arthur, that sentence says the opposite of what you want it to (I think)
" You assume poverty is higher in the U.S. However, poverty is relative and the U.S. has a "safety net." For a large country, with a higher birth rate and higher immigration of poor, the U.S. has little poverty "
Allow me to differ - I think that 17%+ child poverty is very high for the richest country in the world, especially when compared with poorer countries, which allow a child poverty rate of >2%
Might be worth mentioning, since this is a 'happiness thread'.
Posted by: Suvi | Friday, June 08, 2007 at 07:34 PM
Supercilious nonsense from someone who has their head stuck firmly in the ground.
Posted by: Lafayette | Saturday, June 09, 2007 at 08:01 AM
Suvi, under Reagan, the U.S. initiated an arms race (including deploying nuclear missles in Europe), which most Europeans didn't seem too "happy" about. I stated above poverty is relative. It seems, U.S. poverty is defined as a family of four earning less than roughly $19,000 a year in 2003. It excludes tax credits, the value of assets, employee fringe benefits, food stamps, medicare, medicaid, subsidized housing, educational grants & loans, cost of and access to capital, prices of lower end goods, etc. (although cash welfare and unemployment payments are included). Roughly 12% of the U.S. population lives in poverty. I doubt poorer countries define poverty the same way. So, what's considered poverty in the U.S. may not be poverty in the E.U.
Posted by: Arthur Eckart | Sunday, June 10, 2007 at 12:27 AM
"under Reagan, the U.S. initiated an arms race (including deploying nuclear missles in Europe), which most Europeans didn't seem too "happy" about"
Arthur, iirc this wasn't a 'Reagan initiative': it was a response to the Sovs putting SS20 rockets in eastern Europe. It caused a bit more than eye-rolling irritation in West Germany, it's true.
"I stated above poverty is relative. It seems, U.S. poverty is defined as a family of four earning less than roughly $19,000 a year in 2003"
Indeed, poverty is relative. However, $19.000 for a family of four (if the number is correct) is an upper limit and puts the 'best off' American poor around 25% less well off than the PPP GNP per capita number for Turkey in 2003 ($6690). But let's not forget that most of the poor live below the poverty line, and not on it.
Posted by: Suvi | Sunday, June 10, 2007 at 05:54 AM
Suvi, Reagan's massive arms build-up and massive tax cuts facilitated the end of the Cold War and spurred economic growth. On the other side, Warren Buffett, who pays himself $1 a year and has $50 billion in wealth could be considered impoverished, although his social security would be counted as income and lift him out of poverty. PPP is much less accurate than world prices. Using only PPP or income is very narrow. However, in the U.S., there are low-skilled $35,000 to $45,000 a year jobs with overtime (e.g. in transportation and before in construction), which I doubt exist in Turkey. What helped make Britain great was being a nation of shopkeepers. Taxing small business owners will tax away jobs, which helps explain why E.U. unemployment is about 10%. There are many causes of poverty. However, greater prosperity for more people may not be one of them.
Posted by: Arthur Eckart | Sunday, June 10, 2007 at 01:17 PM
Below is a link to nightime satellite photos of North America, Europe, and the world (click pictures for larger images), which reflect economic activity to a large extent.
http://www.nasa.gov/vision/earth/lookingatearth/NIGHTLIGHTS.html
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