Scott Sumner  

Free, good and happy

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Tyler recently linked to a study that used data on happiness in 22 OECD countries (all majority white). Only 6 countries scored above 8.00 in the happiness survey:

Denmark: 8.35
USA: 8.32
New Zealand: 8.22
Australia: 8:05
Switzerland: 8.01
Finland: 8.01

My immediate reaction was to think about our populist candidates, Sanders and Trump. Sanders says he wants to make the US look more like Denmark. But we already look alike; Denmark and the US are the two happiest countries. Trump's support supposedly comes from the fact that Americans are disgruntled. And yet we are happy! (In fairness, the surveys are from almost a decade ago, but I doubt things have changed all that much.)

Elsewhere I've argued that free markets make people more virtuous, happier and richer. (Denmark has the world's freest markets, by some measures.) Commenter Rayward recently directed me to a David Brooks column that worries about an over reliance on both markets and government:

But back then, there were plenty of institutions that promoted the moral lens to balance the economic lens: churches, guilds, community organizations, military service and honor codes.

Since then, the institutions that arouse the moral lens have withered while the institutions that manipulate incentives -- the market and the state -- have expanded. Now economic, utilitarian thinking has become the normal way we do social analysis and see the world. We've wound up with a society that is less cooperative, less trusting, less effective and less lovely.

By assuming that people are selfish, by prioritizing arrangements based on selfishness, we have encouraged selfish frames of mind. Maybe it's time to upend classical economics and political science. Maybe it's time to build institutions that harness people's natural longing to do good.


It's a common misconception that markets make people more selfish. Deirdre McCloskey wrote an entire book on the way that markets instill good values. Here are some other pieces of evidence:

1. Statist polices like rent controls and minimum wage laws encourage people to be evil. It becomes in one's self interest to treat renters poorly, or to treat employees poorly. Some of that occurs even under a free market, but at least under a market system people have some incentive to treat customers, tenants and employees well.

2. People who lived for decades under highly statist governments in Russia and China developed a society with low levels of civic virtue.

3. At least in the Chinese case, there is evidence of causation running from exogenous changes in economic structure to civic virtue. Mainland Chinese visitors to Taiwan tend to notice a higher level of civic virtue, a "better culture".

4. Back in 2008 I did a study that showed that countries that were more neoliberal also tended to be less corrupt, happier and richer.

Like David Brooks, I'm a bit worried about cultural decline (although much less worried than he is). My specific fear is that a $15 minimum wage and expanding rent controls will make people in California meaner. (I hope to retire in California someday.) In fairness, they may be about to legalize pot, which would reduce the footprint of the war on drugs, and thus make society a bit nicer. Ditto for their right to die law, which recently took effect. Indeed it's quite possible that by next year the entire West Coast will have both legal pot and a (limited) right to die law.


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COMMENTS (10 to date)
MikeDC writes:

But as economists, overall happiness matters less than marginal happiness.

Perhaps what matters is not that we're happier than most, but that we're getting less happy. Just thinking about being less happy might even make us sad!

Scott Sumner writes:

MikeDC, Don't depress me.

WalterB writes:

Since both major candidates are proposing radical change in the second happiest nation on Earth, I must conclude that our happiness is not their main concern. Cancel the election until we figure out what is.

E. Harding writes:

"People who lived for decades under highly statist governments in Russia and China developed a society with low levels of civic virtue."

-Try "centuries". Russians and Chinese were not known for their high levels of civic virtue before their respective revolutions. Quite the contrary.

Miguel Madeira writes:

Revealed preference shows that many Finnish are not really happy with their lives.

Andujar Cedeno writes:

I do not understand how you can compare of largely homogenous populations of 5.6 million in Denmark, 5.4 million in Finland, 8 million in Switzerland, or 4.4 million in New Zealand to the massively diverse 319 million people living in the United States in any kind of meaninful way?

name writes:

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Scott Sumner writes:

Andujar, I sort of agree with your point, although I'm not sure we agree on the implications. Suppose we start by considering the EU as a single country, like the US. Both are big and diverse. The US is obviously much happier than the EU. Now think about the fact that happiness varies from one US state to another. It's rather amazing that this large diverse area has roughly the same average happiness as the very happiest non-US OECD country.

In all likelihood, there are individual US states well above Denmark. So the unfair comparison you mention is actually a point in favor of the US doing well. It's easier for a tiny country to out-perform, than a big diverse one.

B Cole writes:

In California, rent controls and the minimum wage are dwarfed by the effects of ubiquitous property zoning and criminalization of push-cart vending.

In 2022 California's minimum wage will be at 1970s levels, adjusted for inflation. A bad idea but merely back to old norms.

Renters and landlords...egads if more housing were built rents would lower yet landlords would treat tenants as valuable customers...

And how would employees be treated if they could start their own push-cart businesses?

Lorenzo from Oz writes:

It is amazing how many people are surprised and shocked that higher reliance on centralised expropriation and domination has worse effect on social interactions than consent-required transactions.

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