Choice and Welfare

I am working on an interesting essay for a subject I have called Choice and Welfare in which I have to comment on some Welfare Theorems, given the recent developments in happiness and utility.

Now this may sound boring, but I found some things, reading for the essay, that really got me thinking. For instance: surveys that have been asking people how happy they are show that the people in developed countries are not happier than they were 50 years ago, although the countries have become 3 times richer since. What the happiness surveys show is that once average incomes reach about £ 10 000 a year, extra money does not make a country any happier.

A recent table has shown Switzerland as having the happiest people, then Denmark, Sweden, Ireland and USA. UK comes 8th.

When asked what makes them happy, 48% of people say relationships, yet most of us speak to a small number of friends each week.

The latest trend for people asked in Uk whether they want the government to bring them welfare or happiness, is that they choose happiness. And Lord Layard, an economist that advises the British politicians, claims that the new objective of the country should not be economic growth, but making people happy.

We seem to be unhappy, because capitalism makes things that once used to be luxury only the rich could afford, things that are necessities now. It makes us want things we never knew we wanted. And we get used to having the best of things, but in order to keep them, we have to work hard. So we over-work ourselves to climb the ladder and in doing so, force others to do the same in order to keep up. So in the end we all loose.

There is a new science of happiness that combines psychology with economics that studies these things. Traditional economists were used to just observe and model the consumer behaviour, without trying to look at what motivates the consumer. This was done on the assumption that everyone knows what is best for himself and that tastes are not to be discussed. But these latest economists that are looking into happiness are starting to doubt that the consumer actually knows what choices to make to keep himself happy. Not when he is bombed every day with adds.

Economists have studied the producer side in depth, they know what makes producers tick and can offer advice in how to run a business and predictions on how the market will evolve.
The interesting question is will economists start to study the consumer side just as thoroughly and give us advice on what to buy and what to choose in order to make ourselves happier? Will economy and psychology join to make this effort in the future?

Some of their first recommendations would be: investing in experiences, rather than commodities, doing over having and working shorter hours and commuting for shorter periods, even if it means living in smaller houses, with not the latest cars.

In fact, we are in a new situation for mankind, where further wealth-creation is now unnecessary for survival. Redistribution of that wealth is another story.

For more on this subject search: www.bbc.co.uk for articles on the happiness formula.