"those interested in maximizing society's welfare should shift
their attention from an emphasis on increasing consumption
opportunities to an emphasis on increasing social contacts."
-- Daniel Kahneman and Alan Krueger, Developments
in the Measurement of Subjective Well-Being
Roll over, Adam Smith. You said that we can trust the
self-interested actions of individuals to benefit others. You said
that an "invisible hand" guides markets, meaning that they did not
require government control. But some of your economist descendants
now claim that the self-interested actions of individuals do not
even benefit themselves. Instead, government should intervene to
make sure that individual choice serves to promote subjective
Alan Krueger and Daniel Kahneman hail the progress that has been
made in measuring subjective well-being, or happiness. They say that
researchers in this field, which is on the boundary between
economics and psychology, have developed reliable methods to measure
how well a person is feeling. This in turn enables them to make
reliable assessments of how happiness is affected by income (both in
absolute terms and relative to that of others), marital status, and
how people allocate time among various activities, from socializing
(good) to commuting alone (bad).
How Low Is Your U-index?
It seems logical that these findings should be taken into account
when formulating government policy. In their paper, Kahneman and
Krueger propose a U-index, where the U stands for "unpleasant" or
"undesirable." They write, "The U-index measures the proportion of
time an individual spends in an unpleasant state." The U-index is
like a golf score -- a low number is a good thing, and
It seems silly for government to evaluate policy on the basis of
how it affects something like GDP or consumer spending, when there
is a more precise measure of well-being available. The U-index would
be a better number to use for fine-tuning policy.
We can imagine how policies might evolve if, as Kahneman and
Krueger suggest, the government views its goal as one of minimizing
the average U-index for its citizens. Government would use laws,
regulations, and monetary incentives to encourage activities that
lead to pleasant states and to discourage activities that raise in
Married people have lower U-indexes (less time in an unpleasant
state) than singles. Perhaps divorce laws ought to be strengthened
to reflect this.
The authors report that spending time in what they delicately
refer to as "intimate relations" helps to lower the U-index. Maybe
the FCC needs to fine the TV networks that don't do more to
Raising children is more stressful than people expect. Government
should incent couples to only have the number of children that is
optimal for the U-index, which may turn out to be zero children.
We may find that caring for people with severe mental or physical
illness causes a lot of unpleasantness. Government would need to do
something about that. Perhaps incurable people should be killed or
put into separate colonies, as was once done with lepers.
The Slippery Slope
At this point, the reader may have surmised that I am not
altogether sympathetic to Krueger and Kahneman. In fact, you may
think that the totalitarian examples I have come up with are an
unfair distortion of their work. They merely claimed to be
"interested in maximizing society's welfare." Hasn't that always
been the goal of economists?
Indeed most economists, with the exception of the Austrian
school, have seen the economist as an adviser to government. The
advice of Adam Smith and David Ricardo was to promote free trade. To
this day, I believe that the most reliable advice economists can
give on topics such as trade, outsourcing, and immigration, is to
point out the broad, long-term and often unappreciated benefits of
these activities relative to their narrow, short-term and
exaggerated adverse effects.
In the twentieth century, economists refined their analysis of
the social benefits of markets. They proved that free markets lead
to an optimal allocation of resources. This
proof rests on a specific definition of "optimal allocation"
and, more importantly, on perfectly competitive markets.
Because some important industries clearly are not perfectly
competitive, economists conceded the desirability of regulation of
such industries. Then, during and after the Great Depression,
economists focused on the need for government to manage the business
cycle and in particular to fight unemployment.* Finally, in the
1970's and later, economists discovered many types of market
imperfections, notably problems related to information, that could
be used to justify government intervention -- see my essay on Hayekians
My point is that -- with the exception of the Austrians --
economists have been going down a slippery slope of interventionism
for a long time. Krueger and Kahneman are simply further down that
The Role of Economists
Perhaps the original sin here is to think of the economist's role
as that of policy advocate. The policy advocate combines the job of
a technician with that of a preacher (Robin Hanson made this point
to me during a discussion that we had after hearing a talk from the
N. McCloskey). The technician predicts the consequences of a
policy. The preacher argues for the policy.
With research into subjective well-being, economists are making
statements about what constitutes the good life. In doing so, we are
encroaching on territory once claimed by philosophers and
theologians -- and, more recently, by self-help gurus. In the 70's,
it was I'm
OK, You're OK. Now, we are saying "I have positive net affect,
you have positive net affect."
One justification for happiness research is that it is more
"scientific" than the typical self-help book. The Kahneman-Krueger
paper makes a strong case for the methodological rigor of their
research program. Krueger is a highly-regarded Princeton professor.
Kahneman was awarded the Nobel
Prize in 2002, an honor which no self-help author can yet claim.
Still, I have a feeling that if happiness research proceeds far
enough, it will serve merely to rediscover some eternal truths. For
example, this New
York Times story cites work by Claudia Senik, who found that
"that when people aspire to a better quality of life within the next
12 months, the attempt to reach that goal alone -- the anticipation
independent of the outcome -- seems to bestow happiness in the
present." Have the sages not been telling us this for centuries?
Meanwhile, it may be too early to proclaim that "science" is
going to inform government policy to lead us down the path to a good
life. We have had many false starts with "science" in the past.
Consider "scientific socialism" or the psychological "science" of
Freud or of B.F. Skinner. The "science" of subjective well-being may
be another chimera.
I wonder how far Kahneman and Krueger would be willing to go to
demonstrate their beliefs in the new "science." Doing research and
writing papers only helps to increase their consumption
opportunities, and it takes time away from social contacts. Surely,
for the sake of their subjective well-being, they should stop
spending time studying subjective well-being.
My guess is that Kahneman and Krueger would say that they enjoy
doing research. However, that only proves their point that
individual preferences are untrustworthy, and that government
intervention is needed. Somebody stop them, before they publish
Arnold Kling is a TCS Contributing Editor and an adjunct
scholar with the Cato Institute. He is the author of Crisis
of Abundance, a book on health care policy.
*For economists who are familiar with the jargon, there is a
wonderful statement of the importance of macroeconomics, attributed
to Nobel Laureate James Tobin: "It takes a heap of Harberger
triangles to fill an Okun gap." No one seems to know when Tobin said
this, but a
lot of us have heard about it.