Adam Smith on growth vs happiness

“Extra income is not generating extra happiness in society” says Richard Layard. “It is impossible for everybody to get richer relative to everybody else, so the effort is wasted.” He says: “We should try and discourage people from comparing themselves with other people.”

Tim has a good take on this. So too did Adam Smith. He pointed out that it was a desire to compare ourselves favourably with others that motivated us to pursue wealth. In by far his best book he wrote:

It is chiefly from this regard to the sentiments of mankind, that we pursue riches and avoid poverty. For to what purpose is all the toil and bustle of this world? What is the end of avarice and ambition, of the pursuit of wealth, of power, and preheminence? Is it to supply the necessities of nature? The wages of the meanest labourer can supply them… Do [men] imagine that their stomach is better, or their sleep sounder in a palace than in a cottage? The contrary has been so often observed, and, indeed, is so very obvious, though it had never been observed, that there is nobody ignorant of it…What are the advantages which we propose by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it. It is the vanity, not the ease, or the pleasure, which interests us. But vanity is always founded upon the belief of our being the object of attention and approbation. The rich man glories in his riches, because he feels that they naturally draw upon him the attention of the world, and that mankind are disposed to go along with him in all those agreeable emotions with which the advantages of his situation so readily inspire him. At the thought of this, his heart seems to swell and dilate itself within him, and he is fonder of his wealth, upon this account, than for all the other advantages it procures him. The poor man, on the contrary, is ashamed of his poverty. He feels that it either places him out of the sight of mankind, or, that if they take any notice of him, they have, however, scarce any fellow-feeling with the misery and distress which he suffers. He is mortified upon both accounts. for though to be overlooked, and to be disapproved of, are things entirely different, yet as obscurity covers us from the daylight of honour and approbation, to feel that we are taken no notice of, necessarily damps the most agreeable hope, and disappoints the most ardent desire, of human nature…The man of rank and distinction, on the contrary, is observed by all the world. Every body is eager to look at him, and to conceive, at least by sympathy, that joy and exultation with which his circumstances naturally inspire him. His actions are the objects of the public care…It is this, which, notwithstanding the restraint it imposes, notwithstanding the loss of liberty with which it is attended, renders greatness the object of envy, and compensates, in the opinion of all those mortifications which must mankind, all that toil, all that anxiety, be undergone in the pursuit of it. (Book I section III ch 2).

If Smith is right – and you can’t explain the popularity of celebrity magazines any other way – then Layard’s desire to end interpersonal comparisons would stop economic growth, because it would kill off the incentive to work and strive for more.

Perhaps, then, the trade-off between growth and happiness is more profound than generally realized. Economic growth depends upon interpersonal comparisons, which necessarily make many people feel bad.

Comments

[Robert Jubb]

The problem with Smith's position seems to be the lack of an explanation for the sentiments associated with wealth and poverty. That sits uneasily with the claim that wealth has no intrinsic benefits over poverty, because the obvious explanation for why people look up to those with wealth and down on the poor is that the wealthy have something of value which the poor lack.

[Robert Schwartz]

"If Smith is right ... then Layard’s desire to end interpersonal comparisons would stop economic growth, because it would kill off the incentive to work and strive for more."

Spoken like a man who has neither wife nor children.