This will be a highly speculative post, which is aimed at getting you thinking "outside the box", not answering any questions. Scott Alexander has a very nice post pointing out that surveys indicate no increase in Chinese happiness since 1999, or perhaps even 1990, despite rapid growth in real per capita income. Then he points to some interesting implications:
Or let me ask a more specific question. Suppose that some free trade pact will increase US unemployment by 1%, but also accelerate the development of some undeveloped foreign country like India into hyper-speed. In twenty years, India's GDP per capita will go from $1,500/year to $10,000/year. The only cost will be a million or so extra unemployed Americans, plus all that coal that the newly vibrant India is burning probably won't be very good for the fight against global warming.
Part of me wants to argue that obviously we should sign the trade pact; as utilitarians we should agree with Sumner that lifting 1.4 billion Chinese out of poverty was "the best thing that ever happened" and so lifting 1.2 billion Indians out of poverty would be the second-best thing that ever happened, far more important than any possible risks. But if Easterlin is right, those Indians won't be any happier, the utility gain will be nil, and all we will have done is worsened global warming and kicked a million Americans out of work for no reason (and they will definitely be unhappy).
I'm going to argue in favor of the Indian trade pact, even if it does cost jobs in America (I don't think it would), and even if it does not boost reported happiness in India, and even if those surveys are accurate, and even though I am a utilitarian. That's a lot of hurdles to overcome, but my basic strategy will be to show that the implications of the China result are far weirder than they seem.
Those who have not visited China might wonder if this is somehow due to one of the popular downsides of growth, such as higher pollution levels. I very much doubt it. China's overcome far more serious problems than pollution. Life expectancy is rising rapidly. A more likely explanation is the sort of "arms race" that has young Koreans studying ridiculously long hours, to private benefit but no social benefit.
Here's one puzzle in the happiness surveys. Back in the 1970s, China was so poor that people often suffered severe pain due to poverty. (Poorer than India was in the 1970s.) Hunger was probably the biggest problem, but untreated medical conditions were also a big problem. So why hasn't the virtual elimination of poverty itself caused the Chinese to become happier? Surely at least those who are no longer in pain are happier. If the survey results are to be believed, then any gains in happiness to some Chinese were offset by losses for other Chinese.
But if trade is your agenda, then this is a theory that proves too much. If nothing really matters in China, if even overcoming horrible problems doesn't make the Chinese better off, then what's the use of favoring or opposing any public policy? After all, America also shows no rise in average happiness since the 1950s, despite:
1. A big rise in real wages.
2. Environmental clean-up (including lead--does Flint matter?)
3. Civil rights for African Americans
4. Feminism, gay rights.
5. Dentists now use Novocain (My childhood cavities were filled without it)
6. 1000 channels in glorious widescreen HDTV
I could go on and on. And yet, if the surveys are to be believed, we are no happier than before. And I think it's very possible that we are in fact no happier than before, that there's a sort of law of the conservation of happiness. As I walk down the street, grown-ups don't seem any happier than the grown-ups I recall as a kid. Does that mean that all of those wonderful societal achievements since 1950 were absolutely worthless?
But there are exceptions. I recall reading that surveys showed a rise in European happiness in the decades after WWII, and Scott reports that happiness is currently very low in Iraq and Syria. So that suggests that current conditions do matter.
The following hypothesis will sound really ad hoc, but matches the way a lot of people I know talk about their lives. Suppose people's happiness is normally calibrated around the sort of lifestyle that they view as "normal." As America got richer after 1950, it all seemed very normal, so people didn't report more happiness. Ditto for China during the boom years. Everyone around you was also doing better, so you started thinking about how you were doing relative to your neighbors. But Germans walking through the rubble of Berlin in 1948, or Syrians doing so today in Aleppo, do see their plight as abnormal. They remember a time before the war. So they report less happiness than during normal times.
I seem to recall that there is also some evidence that different cultures have different attitudes toward proclaiming one's happiness. I read that in Japan it's not considered polite to go around talking about how happy you are. (Can anyone confirm that?) At the same time, I also think it's quite possible that Latin Americans really are happier than Eastern Europeans, or Asians.
Now let's return to the trade issue. Suppose nothing seems to affect the happiness of the Chinese, even eliminating mass hunger. That suggests that for every Chinese person who gained (if only from less pain), someone else lost. But if that's right then there would be no reason to worry about Indian exports causing a million Americans to lose there jobs. Nothing will affect average happiness in America. Those million workers may be less happy, but someone else will be happier.
At this point people on the left will bring up the equality issue. It's not about boosting GDP, it's about boosting equality, because people compare themselves to their neighbors. I think there's a bit of truth to that, but the happiness surveys don't support that claim either. The US scores higher than Europe, even though Europe is more equal. Latin America scores higher than East Asia, even though Latin America is far less equal than places like South Korea and Japan.
If happiness surveys are correct, and basically nothing matters short of horrific war, then its bad news for all ideologues. For leftists claiming equality will make us happier. For right-wingers talking about economic growth.
In the end, I think we need to be very careful here. Surveys show that the Chinese people feel very strongly that China as a whole is much better off than in 1980. They are very proud of the fact that gleaming skyscrapers are transforming their dirty grey rundown cities. Crappy trains are replaced with high-speed rail. They are happy to be able to leave rural squalor and move to the cities. They can eat meat. They are happy to see their children much better off than they were. Here's an example from Pew Research, which asked how satisfied people were with their country's direction:
Suppose we were going to base our trade policy on happiness surveys. We might conclude it doesn't matter for either the US or India, because nothing matters. We might also conclude that civil rights, gay rights and HDTV do not matter. (But don't you dare take away my Novocain!)
Or we might conclude that "utility" is not identical to self-reported happiness, and that utility also includes the sorts of considerations that make the Chinese extremely pleased about the economic progress their country has made.
In my view, the safer course is to admit our uncertainty. If I'm wrong, and the happiness surveys are telling us all that we need to know about maximizing utility, then perhaps nothing really matters. On the other hand, if Blaise Pascal were alive today he might recommend that we'd be better off basing our public policy decisions on a theoretical framework that assumes policy decisions do matter, and implement the policies that work best if they do in fact matter.