Harvard’s Ed Glaeser essay in this month’s Cato Unbound is fresh this morning. He says lots of interesting things, but I thought I’d pick out this bit, which concerns my pet issues:
A belief in the value of liberty flows strongly through mainstream neoclassical economics. Economists frequently speak about an aim of maximizing utility levels, and this is often mistranslated as maximizing happiness. Maximizing freedom would be a better translation. The only way that economists know that utility has increased is if a person has more options to choose from, and that sounds like freedom to me. It is this attachment to liberty that makes neoclassical economists fond of political liberty and making people richer, because more wealth means more choices.
There is a recent wave of scholarship suggesting that the government can help individuals be happy by reducing their choices. While happiness may be a very nice thing, it is neither the obvious central desiderata for private or public decision-making. On a private level, I make decisions all that time that I expect to lower my level of happiness, because I have other objectives. On a public level, I can’t imagine why we would want to privilege this emotion over all other goals. A much better objective for the state is to aim at giving people the biggest range of choices possible, and then let people decide what is best for them.
Excellent. I sometimes call Glaeser’s argument, and arguments like it, ”the economist’s folk theorem for the morality of growth.” You end up with things like the “Easterlin Paradox,” if you get confused about the meaning of “utility” and think bigger choice sets are supposed to entail greater happiness. But Glaeser isn’t the least bit confused. I find his version of the economist’s folk theorem enormously compelling.
“On a private level, I make decisions all that time that I expect to lower my level of happiness, because I have other objectives.”
This strikes me as relying on a very narrow definition of happiness – the kind which Barry Schwartz identified last month as “pleasure-seeking”. Substitute something like “overall and lasting satisfaction with myself and my place in the world” for “happiness”, and it doesn’t seem quite so plausible. But I imagine this is closer to what people (or at least some of them – Seligman, for instance) are getting at when they talk about “maximising happiness”.
“On a private level, I make decisions all that time that I expect to lower my level of happiness, because I have other objectives.”
This strikes me as relying on a very narrow definition of happiness – the kind which Barry Schwartz identified last month as “pleasure-seeking”. Substitute something like “overall and lasting satisfaction with myself and my place in the world” for “happiness”, and it doesn’t seem quite so plausible. But I imagine this is closer to what people (or at least some of them – Seligman, for instance) are getting at when they talk about “maximising happiness”.
There is a disutility associated with having to gather and process the information associated with making the best decision among alternatives. As the set of decisions available to one increases, presumably this disutility increases in proportion. In that sense, a greater set of choices can lead to a decrease in utility unless we assume (unrealistically) that every one has full information. This assumption is what is wrong with many economic models of human behavior.
That said, whenever the government limits choices for individuals, it may be reducing their utility by eliminating a choice that would enhance any randomly chosen person’s utility more than any of the choices remianing to that individual. It’s tricky business.
Studies have also shown that in certain instances people lack the willpower to defer gratification and do something that is in their long term best interest because immediate temptations get in the way. This is why many people would prefer the government to force them to save for retirement – they would like to save, and realize that it is in their long term best interest, but that bobble at the store is too tempting.
There is a disutility associated with having to gather and process the information associated with making the best decision among alternatives. As the set of decisions available to one increases, presumably this disutility increases in proportion. In that sense, a greater set of choices can lead to a decrease in utility unless we assume (unrealistically) that every one has full information. This assumption is what is wrong with many economic models of human behavior.
That said, whenever the government limits choices for individuals, it may be reducing their utility by eliminating a choice that would enhance any randomly chosen person’s utility more than any of the choices remianing to that individual. It’s tricky business.
Studies have also shown that in certain instances people lack the willpower to defer gratification and do something that is in their long term best interest because immediate temptations get in the way. This is why many people would prefer the government to force them to save for retirement – they would like to save, and realize that it is in their long term best interest, but that bobble at the store is too tempting.