Thursday, February 14, 2013

No official interpersonal comparisons of utility, please

Mike Masnick over at TechDirt ponders whether using a measure of Gross National Happiness rather than Gross Domestic Product makes more sense.

Over the past few decades, I have had many opportunities to read and think about variants of the notion that we should not be measuring the total income generated or total value of goods and produced, but some measure of happiness.

I am one of those (apparently dying) breed of economists who is not fond of interpersonal comparisons of utility.

That is, I prefer an economic theory of preferences and choice that is based on statements such as:

  • I like A more than B
  • Person X likes B more than A

but not statements such as "I like A more than B by more than Person X likes B more than A. Therefore, if A is adopted, total happiness in the society will increase because my happiness will increase more than her happiness falls."

In a free market economy with negligible transactions costs, I really valued alternative A over B by more than Person X valued alternative B over A, I could provide a side-payment so that Person X would prefer (A + side payment) to B, and therefore we would both be made happier by adopting A unanimously.

We already suffer from cardinal utility assumptions inherent in progressive taxation: "You have more than I do. Therefore, an extra dollar is worth less to you than it is to me. Therefore, government ought to take from you and give to me."

It seems to me advocates of a measure of "national happiness" do not like there to be a measure of lack of resources brought on about by such anti-growth policies. "Oh, sure, we don't have gas to put in our cars, but, see, we are happier because exercise makes you healthy, and what better way to get exercise than being compelled to ride a bicycle to work?"

Like it or not, a measure of output is less subject to manipulation by bureaucrats.

And, believe it or not, having extra stuff does make life better. Most people in the U.S. will not have the opportunity to fully be immersed in life without abundance (visiting poor countries during "Semester Abroad" and posing with little children in the village and then pontificating about how much happier they are in the comfort of your organic life style does not count). But a moment's reflection about the potential having all the extra "stuff" offers ought to convince honest parties that having more of every good is indeed better than having less of every good.

That is, some people may prefer the bundle (extra $1,000 income, 10 hours less time with loved ones) to the bundle ($1,000 less income, 10 hours more time with loved ones). Others may think that the additional income is not worth the lost time with loved ones. But, you won't find anyone seriously claiming that they wouldn't be made better off by having an extra $1,000 while being able to spend the same amount of time with loved ones. That's all "more is better" means in Economics.

And, producing more stuff enables everyone to have more. A growing pie means everyone can have more cake, instead of fighting over slices of a shrinking pie.

If you think you'll be happier in a country that produces $6,500 of stuff per person rather than a country which produces $50,000 of stuff per person, you have the option to permanently move to such a country.

However, should you choose to move to Bhutan, be careful of what you say. Criticism of the King leads to less national happiness.

I guess, that's the key word: NATIONAL. It is one thing to argue over a dollar measure of the value of all the goods and services produced in an economy to come up with a single number.

It is a whole other thing to try to reduce the sense of well-being of three hundred million or a billion people in to single number.

Such a quantification is the ultimate certification of the desire accept the destruction of the individual in service of the state.

It is a diabolical scheme.

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