posted 18 Oct 2012 12:23 by Neil McRoberts   [ updated 18 Oct 2012 16:18 ]


Will more pie satisfy you?

Sometimes there are strange little coincidences in life when unlikely connections occur. Here’s an example. A recent item in the deluge of media coverage on the US election caught my eye:
We have to figure out how best to grow the pie so it helps everyone,” Paul Ryan, Republican VP candidate, 2012, quoted in a New York Times online article, here.
Although this statement was made by the Republican VP candidate, it might easily have been made by his Democratic Party counterpart, Joe Biden, or by almost any mainstream politician in any country. The reference to pie reminded me of this question, asked by the economist Fred Hirsch in the late 1970’s:
Why has modern society become so concerned with distribution – with the division of the pie – when it is clear that the great majority of people can raise their living standards only through production of a larger pie?“. Sir Fred Hirsch, The Social Limits to Growth. (1978).
While Hirsch seems to be in complete agreement with Ryan, and is arguing against redistribution as a useful idea, in fact his question is part of the set-up for a sustained critical evaluation of the idea that making a bigger economic pie will make more people happy.   Hirsch’s analysis reveals that economic growth inherently leads to increase in dissatisfaction once everyone’s basic needs are met. We can make a bigger pie, he argues, but this will make a larger number of people happier only as long as they’re happy to eat pastry, because the rare and tasty treats that go into the filling are scarce and can’t be made more available by making more crust. Furthermore, the people who already get more of the tasty filling, will still be in that position no matter how big a pie we bake and how many people we invite to share it. Indeed, the promise of pie only makes people feel disappointed when they realize they’re only getting a chance to smell it baking and nibble on the pastry.
In the brilliant introduction to Social Limits Hirsch summarizes the problem with focusing on growth:
Acting alone each individual seeks to make the best of his or her position. But satisfaction of these individual preferences itself alters the situation that faces others seeking to satisfy similar wants. … the sum of such acts does not correspondingly improve the position of all individuals taken together… Opportunities for economic advance, as they present themselves serially to one person after another, do not constitute equivalent economic advance by all. What each of us can achieve, all cannot.”.
Hirsch’s analysis is sobering. One of the central pillars of modern economic democracy is found to have a structural problem: economic growth leads to a growth in dissatisfaction. The solution requires a population-level change in attitudes so that we do not pursue the idea that through sufficient hard work and good fortune we can all join the ranks of the rich. We can’t. And the reason we can’t is that part of what makes the rich rich is the appropriation of goods that are either impossible to share out, or which, when shared out,  come in such small portions that ownership or consumption of them doesn’t lead to a feeling of wealth, or which lose their value as markers of wealth when they lose their exclusivity.
It is the drive to overcome these problems generated by economic growth which leads to the preoccupation with distribution that Hirsch identified. Hirsch argued that growth in a laissez faire economy will lead to increased general dissatisfaction even as it increases the material wealth of a growing proportion of the population. He was writing in the 1970s so we have the benefit of hindsight to evaluate his analysis. Since that time laissez faire economic policies have been pursued by governing parties of the left and right in both the USA and UK. We have seen increasing disparity in wealth (as those who started this recent 30 year rat race with most were best placed to exploit the chance to accumulate riches). The rate of increase in disparity has been lower when left-leaning parties have governed, but disparity in wealth has increased nonetheless.  Anyone who tried to argue that happiness had increased across the population in either country over those 30 years would have a tough row to hoe.
So what about national happiness? There are well-known problems with efforts to construct simple happiness, or well-being, indices comparable with economic indicators such as GDP. These problems notwithstanding, one of the more recent and well-received efforts generated the following set of countries as the top 10 on a national well-being index
1 – Denmark, 2 – Switzerland, 3 – Austria, 4 – Iceland, 5 – The Bahamas, 6 – Finland, 7 – Sweden,
8 – Bhutan, 9 – Brunei, 10 – Canada
One interesting feature of the list is that the European countries that appear in the top 10 have relatively flat income distributions; the rich in these countries are not astronomically many times richer than normal people (the people we now call “middle class” but who used to be called both middle class and working class – Hirsch’s ratchet can be seen working in the fact that we no longer appear to have a working class). On the same ranking, the UK is 41 and the USA 23. The fact that Denmark is ranked 1 brings me to the second coincidence that stimulated this post. In snatched moments of quiet I’ve been reading Peter Hoeg’s The History of Danish Dreams and in the last few days came across this quotation:
and with wealth we can say it is progress indeed when few have too much and still fewer are in need“. N.F.S. Grundtvig quoted in Peter Hoeg’s The History of Danish Dreams.
Grundtvig is widely acknowledged for shaping the Danish social conscience so perhaps it is not surprising it should be a happy place, given Grundtvig’s opinions on wealth and Hirsch’s analysis of the effects of growth on happiness?