Innovation & well-being

Diane Coyle and Emily Skarbeck point out that innovation doesn’t seem to show up in GDP or productivity data. As Diane has written, “the way GDP is measured makes it impossible to capture fully the effect of innovation.”

One reason for this, says Diane, is that GDP data don’t capture “the explosion in variety” of goods and services available to us. Eric Beinhocker has given a nice long-run image of this. The biggest difference between New Yorkers and primitive tribes, he says, isn’t the “mere 400-fold difference” in their incomes, but rather the 100 million-fold difference in the number of products available to them.

This, though, deepens the puzzle. Not only does innovation not appear in the GDP statistics, it doesn’t appear in subjective well-being statistics either. The OECD has reported (pdf) that the UK “experienced no consistent change” in life satisfaction between the mid-70s and late 00s, and the ONS estimates (pdf) no change since then either.

This is weird. For one thing, in The People, Selina Todd points out that there was a time when rising real wages did increase happiness:

In 1949 Mass Observation interviewed 2040 people across England about their income and spending patterns. The investigators discovered widespread satisfaction, especially among manual workers and their families: " a third say that they have no particular wants beyond those that they can afford."

And for another thing, common sense tells us that if our real incomes are flat, the explosion in variety which innovation provides should increase our well-being simply by allowing us to improve the match between our tastes and what we can buy.

So why doesn’t it? Here are two theories.

First, there’s a big difference between piecemeal innovation which produces more of the same, and innovation which increases variety.  “More of the same” gives us increases in real incomes in a steady environment: think of the stereotypical mid-20^th century worker who enjoyed rising real wages whilst working for the same firm his whole life. Increases in variety, however, entail creative destruction: think of smartphones destroying Nokia, Spotify the music business, Uber taxis and so on. Whilst providing benefits for consumers, this generates uncertainty for workers. And many (pdf) people hate uncertainty.

A second reason has been pointed out by Katherine Guthrie and Jan Sokolowsky. Quite simply, as variety increases, so too does opportunity cost: we can’t afford both the new phone and the PS4, or if we’re holidaying in the Maldives, we can’t be in Dubai. Variety brings with it regret. This is consistent with something found by Sheila Iyengar, that increases in choice can be demotivating (pdf).

I don’t say this to deprecate increased variety. Quite the opposite. Intuitively, it seems to me that variety must be a great good. What made the Soviet Union so drab and joyless was not so much the material poverty of the people as the lack of variety of goods. And one reason we are mourning* the death of David Bowie is that he, more perhaps than any other pop musician, gave us innovation and variety.

Perhaps instead there’s another inference here – that not only is GDP an inadequate measure of a healthy economy, but so too in some respects are measures of subjective well-being.

 * Mourning is the right word, arseholes.

Comments

[Diane Coyle]

Very interesting observation. I wonder if the key is in the difference between 'people' and me. I want a limited choice among things I want to choose. Your subset will be different. The paradox of choice is real at the individual level but you can't aggregate because we are all occupying different psychological locations in choice space. Aggregation is very problematic.

[Jonathon Martin]

The connection between wanting something, getting it, and being generally happier is complex too. I am glad that where I live I have the option to buy a certain kind of doughnut I find hard to resist. Because I find it hard to resist I consume it even though I am in fact trying to lose weight. Being chubby makes me far less happy than the pleasure I get from the entire doughnut consumption process. As a result, I would benefit not just from less choice, but from less choice even among things I really like to consume.

This goes for a lot of the things we consume. Despite really wanting them, they do not make us happy overall when we get them. Happiness is not, after all, the mere satisfaction of wants.

So maybe we shouldn't worry much about choice, aggregate or otherwise, unless we can specify what those choices really add to our lives overall.

[Igor Belanov]

" * Mourning is the right word, arseholes."

I'm afraid it isn't. Unless you knew the man you're just suffering from a form of emotional diarrhoea.

[Luis Enrique]

I think I have mentioned this before but Ken Binmore used to tell a story about how subjective well being data shows no difference on average between those who have had a colostomy and everyone else, so long as you ask people over 6 months since they had the operation (they are miserable after the op). One would not want to infer having half of your bowel removed is irrelevant to well being.

[Kate Gimblett]

Perhaps this conundrum of static satisfaction is related to rising inequality. Yes we have increasing choice in consumption goods and entertainments, but many see the lion's share of returns to all forms of economy activity going to the top 1 percent of the population and feel unsuccessful in positional terms. The psychological importance of perceived unfairness is to some extent hard wired and is even present in primates like chimpanzees. Please note that the measurement period (mid 1970s to 00s) coincides with the period of rising inequality in income and wealth that is concerning us all.

Incidentally, I noticed that you will be at the Corpus commemoration of Andrew Glyn. Perhaps this topic is one we should explore on the day?

[Deviation From The Mean]

The vast array of goods can be looked at negatively. We produce endless varieties of things that all do pretty much the same thing (or nothing particularly useful) because ultimately people have no say in the matter, everything is outside their control. People are reduced to passive consumption.

And the price of this passive consumption is ever greater pressure on the job (as well as environmental disaster).

But people are addicted to the consumption and therefore take the pain.

But addicts are rarely happy, in the final analysis.

This brings me to the concept of efficient consumption, a concept lacking in this system and culture.

[Kate Gimblett]

Apologies- I meant to write 'economic activity' (not 'economy activity') but my iPad had other ideas!

[Matt Moore]

Or something else happened at the same time that reduced happiness? Like the rise of materialism and hedonism, mass family breakdown, the decline of religiosity etc

[Keith]

May be the concept of Happiness is an illusion or cannot be measured with numbers?

"In 1949 Mass Observation interviewed 2040 people across England..." well in 1949 most people would have been comparing life then with the hungry thirties and so full employment with mass unemployment and no security with the new NHS and "welfare state "from cradle to grave". Not to mention avoiding death in the Blitz. While Punks in 1975 thought they lived under a "Fascist regime"! How do you quantify having antibiotics compared to not having them? change makes all comparisons matters of judgement once it has gone far enough and is big enough. So the value of attempts to quantify it are doubtful. There is no neutral measuring standard.

[Richard]

"Or something else happened at the same time that reduced happiness? Like the rise of materialism and hedonism, mass family breakdown, the decline of religiosity etc"

Also, possibly the increasing cost of essentials. What we gain in smart phone and flat screen TVs, we lose in lack of housing or financial security?

[reason]

Keith
in 1949 most people in Britain would have been comparing life then with World War II.

[Dave Timoney]

Bowie wasn't innovative. Musically he was closer to Broadway than Boulez. His talent was variety, the ability to reinterpret and combine the ideas of others, from Iggy & Lou to Neu & Can (as with any magpie, his instinct was occasionally erring, from The Laughing Gnome to the Steve Strange-inspired Scary Monsters).

Much of his attraction (and thus the root of our narcissistic mourning) was the conviction with which he took up and discarded new personas and ideas, which reduced the anxiety of post-60s individuation to dressing-up (hence we forgive his flirtation with Fascism as an aesthetic impulse). But though he was exemplary, few of us had the discipline to emulate him (I suspect many secretly suspect he lopped a decade or two off his life through fags and coke).

He redefined variety as innovation: constantly working the angles, restlessly demanding of those around him, emblematically turning his old dressing-up box into an art exhibition and translating his future royalties into Bowie Bonds. He was the original of Foucault's "entrepreneur of himself". Was he happy? He was certainly busy.

[Luis Enrique]

FATE

"our narcissistic mourning"

why write things like that? Why do you want to have a pop at anybody who feels a bit emotional about his death? Is everything we do narcissistic? Are your comments on this blog narcissistic?

[David]

My sense of well being has not improved since the 1970's because when I started at university I was earning £100/day, Guinness was 17 new pence a pint, and nobody told me that I should not drink it (and nobody told me not to drive afterwards).
Now, today, I would need to earn £2000-3000 pounds per day to have stayed still. I am 1/10th as happy as I was back then in earning power, and if I take into account the nanny effect... even unhappier!
My long slide into relative unhappiness has been closely correlated to the inverse of inflation.
Entertainment and innovation, which could have lifted my spirits since, were considerably better in the 1970's than now. There has been very little change....
In the 1970's..
David Bowie was new and exciting.
Television was already in colour.
Beer was considerably cheaper and warmer and already served in glasses rather than pottery mugs.
Monty Python etc.......
And cars even went faster! (because they were allowed to)....

[Dave Timoney]

Luis,

When we mourn the passing of a public figure we are mourning our own past through the prism of that figure's history, hence the "what he meant to me" spin of many of the Bowie eulogies. That's narcissistic, but I'm not having a pop when I say that. It's a feature of modernity and I'm as susceptible to it as anybody else, which should be obvious from my comment above (I was a critical admirer, not a hater).

As a creative artist, Bowie was also an exemplary narcissist because he had the courage to selfishly pursue his desires, despite the collateral damage it caused to others. In contrast, most of us compromise. What I've sensed in a lot of the Bowie tributes is relief that he went quietly and without regrets, that he didn't turn into a bitter old arsehole at the end, which meant the belief that "He gave me the courage to be myself" wasn't compromised.

"Is everything we do narcissistic?" No, but a lot is and its a growing tendency. Bowie was a critical cultural figure in normalising this during the early neoliberal era, in particular the idea that identity could be freed from social ties and treated as a commodity in its own right. Are my comments narcissistic? Certainly. I'm not doing it for the money.

[An Alien Visitor]

David, I work exactly the same number of hours as I did in 1985 but the intensity has increased. So from that point of view, despite the progress in technology, there has been zero improvement and in effect, there has been a decline.

Personally, I would prefer less choice and less hours to more choice and more hours.

[Luis Enrique]

FATE

thanks for explanation - I misunderstood you to mean narcissistic to be pejorative. Although I think others usually use it that way. You may not be commenting for the money, but I don't think doing things because we like to = narcissistic. Why isn't all mourning narcissistic by your lights? When my mum died, I could have written a what she meant to me column, if you see what I mean.

[Dave Timoney]

I think it's well-known that our admiration for the famous is tinged with hatred. This is narcissistic: resentment that someone else is the centre of attention and (mild) self-loathing at our own emotional investment, which can never be fully repaid.

When we eulogise the famous dead, there is a desire among some people (not all) to bring them down to size as a form of emotional closure, reflecting regret over our younger selves' over-investment. The solipsism of "what he meant to me" is a way of claiming that our own existence validated the deceased, which is obviously absurd, but it's too late now to get an "I owe it all to ..." tribute out of them.

There is also a degree of appropriation, that is an attempt to provide a definitive statement, to "own" the history, which is where the difference between Bowie and your mum comes in. This has been particularly noticeable with Mr Jones because of the ambiguity of his lyrics ("what he really meant was ..."), his personae and his public statements (the Fascist groove thang).

Our collective response has been narcissistic because its what he would have wanted. We are merely holding up a mirror to Bowie's now breathless face.

[David]

By the way Luis.....
I have been quite miserable for 5 years now.. feeling quite unwell and suffering some fairly serious side effects since my colostomy.
Ken Binmore, whoever he might be, knows very little about the human condition.
When I was young, feminists used to say, in response to everything spouted by a "man" that to "generalise" is a masculine and bad trait.
Ken should try a colostomy for fun, or maybe a sex change....

[Luis Enrique]

David, I'm sorry to hear that. But assuming he made no error Ken was just reporting what people say in self reported happiness surveys. Obviously no difference on average does not mean nobody very unhappy.

Fate I don't know where to begin and am baffled by people who read that much into things. I can think of a few famous people I might write what they meant to me columns about if I was a columnist. I don't recognise anything you say, from introspection.

[reason]

" I think it's well-known that our admiration for the famous is tinged with hatred. This is narcissistic: resentment that someone else is the centre of attention and (mild) self-loathing at our own emotional investment, which can never be fully repaid. "

Why do you think it is well known? I've never heard of this before. And I don't think it is true, at least it is not true for me (before I tend to admire particular things about people not whole people - I'm not into here worship - but maybe that is just me).

[Dave Timoney]

@reason, You could read a book on psychology, but it might be more entertaining to watch a film. I recommend The King of Comedy.