Two days ago, the Organisation for Economic Co-Operation and Development (OECD) relaunched its “Better Life Index.” According to it, women are generally happier than men and Australia is the happiest country (assuming all categories are equally-weighted). But does happiness research pose a threat to society?

What is Happiness Research?

Happiness research has exploded over the last few decades. The idea is to quantitatively measure happiness as well as what makes people happy. This allows for all sorts of comparisons between groups as well as nations.

Happiness research tends to treat individuals with a broad brush. But happiness is entirely subjective. Different people have different preferences. Some people value money derived from work more than leisure time and vice versa. The Better Life Index attempts to deal with this fact. It allows users to personalize their indexes based on how much they value eleven separate categories: community, education, environment, civic engagement, health, housing, income, jobs, life satisfaction, safety, and work-life balance. So, this would appear to be a marked improvement.

Cardinal Utility – The Fatal Flaw of Happiness Research?

Unfortunately, the Better Life Index doesn’t deal with the underlying problem. Happiness research depends on something known as cardinal utility. Cardinal utility holds that personal preferences can be accurately measured by a third-party. However, cardinal utility is an outdated view. No one believes it…no one except happiness researchers that is.

Take the Better Life Index. It asks people to self-report how much they value various categories. However, a stated preference don’t necessarily equal a demonstrated preference. What’s the difference? A stated preference is saying you’d take a pay cut to have more leisure time. A demonstrated preference is actually following through on it.

“The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man’s preferences; that is, that his preferences are deducible from what he has chosen in action. Thus, if a man chooses to spend an hour at a concert rather than a movie, we deduce that the former was preferred, or ranked higher on his value scale.” ~ Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics

Actions speak louder – much louder – than words. There are several ways stated preferences can mess up happiness research. First, people alter their preferences all the time. So, even if a person creates an “accurate” Better Life Index, he might change his mind when it comes time to make an actual choice. Second, a person might think they prefer doing one thing. But when presented with a choice, that same person might do something else entirely.

“In vacuo, a few consumers are questioned at length on which abstract bundle of commodities they would prefer to another abstract bundle, and so on. Not only does this suffer from the constancy error, no assurance can be attached to the mere questioning of people when they are not confronted with the choices in actual practice. Not only will a person’s valuation differ when talking about them from when he is actually choosing, but there is also no guarantee that he is telling the truth.” ~ Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics

Guerrilla Explorer’s Analysis

So, maybe happiness research isn’t all that accurate. So what? It’s just for fun right? Well, maybe not. It might seem innocuous, but there’s a dark side to it. Politicians and bureaucrats from around the world are taking a page out of Jeremy Bentham’s book and claiming public policy can be used to engineer societal happiness.

“The most commonly cited statistic in happiness economics is the rule that somewhere between $40,000 and $110,000, a higher salary doesn’t buy much more joy or satisfaction. Many people draw the bright white line at $70,000. This provides a strong utilitarian impulse to raise taxes on the rich, who apparently can’t buy much happiness with their extra millions, and to funnel the money to the poor to bring them closer to $70,000. … But one reason why incomes differ is that some people care more about making money than others.” ~ Derek Thompson, The New Economics of Happiness

We barely understand happiness. And we certainly can’t measure it with any type of accuracy. So, the idea that politicians and bureaucrats can engineer it is an illusion. But that won’t stop them from trying. In the end, the research that is supposed to be improving lives might just end up ruining them.

“Apologists for Marxism have made myriad excuses for their ideology’s failure to provide the same standard of living and liberty as was enjoyed in capitalist nations. Until recently, few have been so brazen as to claim that lowering living standards and curtailing freedom were the intended consequences, let alone that people would be happier with less of either. … Limiting choice, reducing wealth and lowering aspirations are now openly advocated as desirable ends in themselves.” ~ Christopher Snowdon, The Spirit Level Delusion: Fact-Checking the Left’s New Theory of Everything

For Further Reading: The Trojan Horse of Happiness Research by Thomas J. DiLorenzo