Philosophical Issues in Economics

Introduction

Bentham postulated ‘The greatest happiness for the greatest number’ principle as the aim of life. But Bentham and most subsequent moral philosophers have reconciled themselves to the fact that measurement and interpersonal comparisons of happiness between individuals is not achievable.

‘Bentham’s initial optimism ….was qualified by his later remark that “intensity is not susceptible of precise expression (1843: Vol. IV, 542). He was indeed acutely aware of some of the key problems in measuring utility. He also explained the obstacle of adding individual utilities to arrive at a social sum, writing that ‘tis in vain to talk of adding quantities which after addition will continue distinct as they were before, one man’s happiness will never be another man’s happiness. (Bentham in Halevy, 1901: vol, III, 481)¹⁰⁷
But recently Richard Layard in his book, Happiness: Lessons from a new science, has traced back to Bentham and has declared that happiness can be measured. His method of measurement is through evidence collected in surveys. We ask people how happy they are, and we then ask their friends and observers to authenticate the answers. (He claims people tell the truth in these surveys). He substantiates this method of measuring happiness through Neuro-science. The method entails taking measurements of the electrical activity in the left and right part of the lobe. According to Richard Davidson at the University of Wisconsin there is an area in the left front of the brain, which is the storeroom of happy feelings, and a similar area in the right front where unhappy feelings are experienced. Happiness when experienced by people is reflected in these brain areas. Happy people are more active in the left lobe, and unhappy people are active in the right lobe. So he concludes that happiness is a real objective phenomenon, an objective dimension of all our experience. Since it can be measured therefore we can formulate policies that increase happiness.

Can Happiness be measured?

The purpose of this essay is to examine the measurement techniques of Layard and question how successful they are in measuring happiness.

Layard relies on Kahneman’s experiments, surveys and Neuroscience experiments to measure happiness. Although Kahneman’s method of measuring happiness is insightful but may be misleading. In his example of measuring pain of patient A and B, what really is the true measure of happiness? Is it the moment-based approach or the memory–based approach? Since what people prefer in retrospect is not the same as they prefer at that moment. If asked at that time of experiment to either stop the pain or tailor it off, at that moment they will say to stop it immediately¹⁰⁸ but when asked later they would prefer to tailor it off. So Kahneman’s peak-end rule is contestable.¹⁰⁹ It is hard to say which approach is a better determinant of happiness.

Therefore when Kahneman asserts that ‘like total utility, objective happiness is a moment- based concept that is operationalized exclusively by measures of the affective state of individuals at particular moments of time’ is not persuasive. Since the moment-based conception might not be an accurate gauge for measuring as complicated a notion as happiness. Happiness may be a cumulative process; it may be reconfirmed through retrospection. Maybe retrospection is included in defining or realizing happiness. Mostly it is looking back that makes us realize how happy/unhappy we were at a particular instance. And at that particular instance we were not cognizant of the reality. Maybe the good memories control us at an unconscious level augmenting our everyday objective happiness. Of course there maybe the aspect of retrospective glorification, but that is the freedom every individual should have to play with his memories. Therefore his example where people are given beepers who are asked at a particular instant to report how happy they are at that instant is not a convincing measure of happiness as it is based on the Moment-based approach.

Also when Kahneman compares two different nationalities the French and the Danish, where the evidence in the survey shows, that one is very happy and the other not so happy, it does not imply that the situation is so in reality. Happiness is a subjective term. My notion of very happy might equate with your level of barely happy. You cannot assume that they have identical measurement scales, as we haven’t tested every Frenchman’s brain in the laboratory.

Interpersonal comparison of pain is not very accurate as pointed by Kahneman (when comparing women in labor pain). When comparing peoples ability to handle pain, one has to be cognizant of the fact different people have different thresholds of pain and differ in what they classify as bearable or unbearable pain.

The postulate by Layard and Kahneman (the hedonic treadmill) that people get used to a higher standard of living, or adapt to better changes and get used to it and revert back to the same level of happiness, can be contested. Sometimes positive changes take a person to a higher state of happiness and then tailor back, but do not dip to the base level but stabilize at a higher level. I was euphoric when I got admission in Cambridge, the euphoria has gone but my general level of happiness and satiation has now settled at a higher level than it was before I got in. say I had initially 200 units of happiness, the admission took me up to 300 units, but now I am back at 250 units, still a higher base level. Even if I had dipped to 200 units, those 200 units would be enhanced, reliable and stable. Similarly moving from one country to another, which offers a better quality of life, surely does increase happiness as opposed to what Kahneman concludes.

Layard’s method of measuring happiness by asking people in surveys might not be very effective either. People might not be truthful about themselves; they might not be lying to the surveyor but also to themselves. Also if they are not happy they might want to give an optimistic response. If the questions are related to policy incentives and they will gain goods if they report that they are unhappy then they will have an incentive to lie. People also tend to live a life of pretence, where impressions are very important. People may like projecting themselves as being happy and successful. This may all be deceiving and lead to an inaccurate measurement of happiness.

And all the citizens cannot be subjected to the experiments of neuroscience. It would be too expensive and time consuming to evaluate whether the area in left lobe or right lobe is more active in every citizen. Also measuring happiness through the artificial environment, by neuro-science might not be reliable. Since it is not a bypass or a liver transplant, where the organs would remain the same even in the artificial environment of the experiment, but is an analysis of the mind, which is susceptible to the environment and might not show accurate responses in the artificial environment.

Layard’s claim that interpersonal comparison on happiness is possible is contentious. In surveys it is not possible to make interpersonal comparisons. My state of happiness does not commensurate with your notion of happiness. Both do not have the same scale of measurement. The machine also creates ambiguity. How much it lights up in my brain does not correspond to the same happiness levels in your brain. An interpersonal comparison on happiness is just not possible. (Although the Pareto criterion for welfare improvement by making one individual better-off without making another worse off may offer policy implications because it does not assume that interpersonal comparisons can be made. But then the Pareto welfare criterion also has serious limitations.)

Layard’s measurement of Happiness and the policies he advocates as a corollary.

Layard claims that happiness can now be measured, so the state should pursue policies to augment happiness, as national income is not an adequate measure. He says since in the last fifty years we have increased our national income but we are no happier than we were before, as people get involved in the rat race and living up to their neighbors, and disregard what makes then happy. Money after a certain level does not increase happiness and promotes feelings of envy in others. Therefore taxation should be used as a disincentive to excessive working, because the desire to make more money takes away the time that could have been spent in leisure.

But Rich people work also to achieve a sense of satisfaction and achievement and not only for additional money. And if people have more time for leisure and family, won’t they get used to that level of happiness and go back to the initial level that Layard claims we all revert back to?

Layard maintains divorce is a major cause of unhappiness. The policy he offers in response is that the state should offer counseling and parenting classes so married people stay together to ensure the well being of the children. But some people need to divorce to secure happiness for themselves and their children. And by forcing its citizens by attending parenting classes is the states not decreasing the happiness of the citizens by making them feel as inadequate spouses and parents?

His policies reflect the era of the 50s, but he himself says we are no happier now as we were then! So what is to be gained? The policies also might deceive/brainwash some people into believing that they are happy because now they should be happy.

He talks against the Joneses effect and catch up pressure, but if he assumes that happiness can be objectively measured then what happens when I compare my units of happiness with another, and find that I am lagging behind in units, whereas previously thinking as being happy in comparison I will now feel worse-off.

If the research that life circumstances make only a small contribution to the variance of happiness-far smaller than the contribution of inherited temperament or personality¹¹⁰ and although people have intense emotional reactions to major changes in their lives, these reactions appear to subside more or less completely¹¹¹. Then the policies cannot succeed as happiness is inherited or a personal attitude and not contingent on state policies.

Layard does not mention applying the policies world wide, because otherwise if Britain adopts the happiness policies in isolation, people start working less, their productivity falls relative to the rest of the world, they will feel left behind and inferior, their level of happiness will fall. Layard defeats himself here.

Layard even if he believes that happiness can be measured does not arrive at the right kind of policies that should be pursued as a consequence. Although Layard claims to back to Bentham and his concept of happiness, his conception of happiness and measurement is not synonymous to how Bentham envisaged it. He does not have Bentham’s quantitative approach but has a qualitative experience of happiness. And the link between measurement of happiness and the policies he puts forth is not strong. The Policy implications are lacking in insight. Maybe he himself does not truly believe it can be measured the way Bentham envisaged it to be.

Conclusion.

To measure happiness we must make the assumption that all individuals have the same measurement scale. To make interpersonal comparisons we all need to have similar manner of expression, similar abilities of deriving happiness, and the same denominator and the same numerator!

We have assumed that we have defined happiness, and hence can measure it. Maybe happiness escapes definition let alone measurement. So Layard’s claim that it can be measured and hence can function as the social maximand is not convincing.

I would conclude with Jevons when he says ‘there is no unit of. …Suffering, or enjoyment…I have granted that we can hardly form the conception of a unit of pleasure or pain, so that numerical expression of quantities of feeling seems to be out of question… I confess that it seems to me difficult even to imagine how such estimates and summations can be made with any approach to accuracy.’ {Jevons, 1871/1911:7, 12, 1871:12) interpersonal comparisons of utility were held by Jevons to be impossible too.¹¹²

Bibliography
R.Layyad (2005). Happiness: lessons from anew science. London: Penguin group
C. Turner and E.Martin (eds.) Surveying subjective Phenomena. Volume 2. New York: Russel Sage Foundation.
D.Kahneman and A.Tversky (2000). Choices, Values and Frames. Cambridge: Cambridge university press

Essay 2

(by John Ssegendo)

Layard attempts to advance a new approach to measuring happiness when he argues that

“….economics equates changes in happiness of a society with changes in its purchasing power.....and the history of last fifty years has disproved it…..instead, the new science of happiness makes it possible to construct an alternative view (based on evidence rather than assertion)” (Layard 2005: ix).

Layard’s objection to the use of income in measuring happiness in favour of brain science is a leap forward from economics but with great practical policy implications. By this approach he ignores the many objections economists and philosophers have held about measuring happiness—considered to be subjective phenomena. On the contrary, Layard argues that “…..brain science confirms the objective character of happiness….” (Layard 2005:20). By combining psychology and brain science, Layard defines happiness and emphasises that it can be measured.
“ Happiness is feeling good and misery is feeling bad.......at any moment we feel some where between wonderful and half dead and that feeling can be measured by asking people or by monitoring their brains……..we can go on to explain a person’s underlying level of happiness—the quality of his life as he experiences it……….” (Layard 2005:6).
With the help of the new science, it is now possible to measure what happens in the brain when people experience positive and negative feelings. Layard emphasises that “………we now know that what people say corresponds closely to the actual levels of activity in different parts of the brain which can be measured by scientific means” (Layard 2005: 16).
Even if it were possible to measure happiness objectively with the help of the new science, it is at least not hard to realise that such an enterprise would be prohibitively expensive in terms of money and time. It would require that brain tests be taken for a wide cross section of the population to verify results from interviews about people’s feelings as a measure for happiness. If we are to believe Layard when he asserts “that what people say corresponds to different levels of activity in their brains”, for practical policy reasons, one would as well conclude that since what people say closely correlates with what they actually feel, probably we may as well just conduct surveys on people’s levels of happiness and not incur the enormous costs of brain tests. Besides less people I suppose, would be willing to undergo brain tests. The alternative would then be to settle for asking people about what they feel and consider the process an objective way of measuring happiness. Yet if these adjustments are allowed, it takes us back to the doubts that other economists have had about the subjective nature of measuring happiness.
In a related dimension, even if people would be willing to take the tests given the expenses involved, it would take a long time to survey a whole national population. Well knowing that people’s feelings vary widely over time due to external factors, it would be hard to have any meaningful precision and hence had to make any objective conclusions about people’s happiness.
Layard further argues that there is consistency in results from different methods used to measure happiness:

“Happiness is an objective dimension of all our experience. ….We can ask people how they feel. We can ask their friends or observers for an independent assessment…..Also, remarkably, we can now take measurements of the electrical activity in the relevant parts of a person’s brain. All of these different measurements give consistent answers about a person’s happiness. With them we can trace the ups and downs of a person’s experience and we can also compare the happiness of different people………………happiness is a real objective phenomenon………happiness is a single dimension of all our waking experience, running from the utmost pain and misery at one extreme to sublime joy and contentment at the other” (Layard 2005:224).

If feelings swing from happiness to misery, how realistic will be a measure of happiness that is administered at a point in time. I could be feeling horrible in the morning and in the afternoon I am in high spirits. Supposing I am asked how I feel in the morning I will say terrible yet were it to be in the afternoon, I would say wonderful. On the contrary, my neighbour’s mood might be the exact opposite of myself at given moment in time, yet tests will not reflect the rapidly changing feelings even at short term intervals.
Even if we were to relax the objection to the difference between what people report and what they actually feel, which could be solved by brain tests, the tests at least may not reveal the intensity of the happiness and the reasons for happiness and or misery. This means that brain tests are inconclusive and we must rely on individuals to give explanations to their feelings of which we do not have control. We are not at this level certain whether they shall tell the truth or they shall lie.
The other criticism on interviewing people about happiness and use of brain tests is that once individuals are being interviewed, their environment and feelings are altered.

There has been a long debate in social science research on the influence of researchers on respondents. It is believed that individuals will react differently in an interview situation, or when they have knowledge that they are being observed than will be their normal behaviour. On asking people about their past experiences, people would like to retell only their good experiences to strangers and it takes trust for people to tell their bad experiences. Given this situation, asking people to report their experiences as a means to measuring their happiness is flawed.

Layard’s approach is a leap from the work of earlier economists and philosophers who were sceptical about obtaining an objective measure of utility and happiness. It has for long been thought that there are differences between what people say when asked about how they feel and what goes on in their brains. There has also been objection to comparisons between individuals and more broadly society. Agreeing to what Layard says would be tantamount to a revolution in our knowledge and would require that all doubts about measuring happiness have been dealt with. I still believe that we are far from attaining this. My view will be supported by views of philosophers and economists about the objections to measurement of happiness.
Bentham and Mill identified utility with happiness and this with “pleasure and the absence of pain. Bentham was aware of the problems of measuring happiness. He believed that sensitivity to pleasure might vary between individuals for a number of reasons including age, sex, education and firmness of mind (Mill 1968 in Meeks 1980). This situation would complicate attempts to measure pleasure. He also explained the obstacle of adding individual utilities to arrive at a social sum writing that
“tis in vain to talk of adding quantities which after the addition will continue distinct as they were before……you might as well pretend to add 20 apples to 20 pears which after you have done could not be 40 of anything, but 20 of each just as they were before” (Bentham in Halevy, 1901:VOl III, 481).

Jevons expressed the same fears about the possibility of arriving at a unit of pleasure or happiness.

“There is no unit of ……suffering, or enjoyment ………..we can hardly form the conception of a unit of pleasure or pain, so that the numerical expression of quantities of feeling seems to be out of the question. I confess that it seems to me difficult even to imagine how such estimates and summations can be made with any approach to accuracy. …………..I see no means by which (comparison of) the amount of feeling in one’s mind with that in another……can be accomplished. The susceptibility of one mind may, for what we know, be a thousand times greater than that of another……..Every mind is thus inscrutable to every other mind, and no common denominator of feeling seems possible (Jevons 1871/1911: in Meeks 1980: 45, 56).
Both Bentham and Jevons believed that the human mind was inscrutable. By this very fact, it was perceived hard to imagine how one would numerically express units of happiness that were not accessible to any unit of measurement. Bentham also believed that people’s experiences were unique and by that very fact considered it unworkable to attempt to sum them.
More relevant to the new brain science, Robbins (1938) maintained that whereas man’s preferences might in general be resolved “in a way purely scientific” either by asking him or observing his behaviour in the relevant context of choice, there is no scientific way of settling the differences of opinion about the satisfaction of different people. The differences in opinion about satisfaction would definitely complicate attempts to quantify people’s preferences.
Little (1957) objected to Bentham and Jevons’ notion that minds were inscrutable and maintained that we can use different men’s behaviour to compare their mental states. He emphasised that “interpersonal comparisons of satisfaction are empirical judgements about the real world, and are not, in any moral context, value judgements”. Layard would find solace in Little’s observational approach to measuring happiness as he claims that there is a close relationship between what other people observe and what people say when asked and when brain tests are taken to measure their feelings. In my opinion though we can not deny interpersonal comparisons of people’s behaviour, this does not make the procedure objective. I think some people are more able than others to control their feelings so that what we observe may not reflect people’s mental states.
More importantly, Little argues that judgements about changes in community utility cannot readily be constructed by inference from interpersonal comparisons made in a limited sphere because of the difficulty in establishing the extent of secondary effects. And he holds that access cannot be had to direct factual judgements of changes in the way that was possible for individuals largely due to the sheer weight of numbers. In my view, this objection to using the observation approach to measure happiness at a societal level is an insurmountable challenge to Layard’s approach.
Some Policy Implications

Bentham believed that all laws and actions should be aimed at promoting the greatest level of happiness. Layard believes in the above principle and argues that at policy level this implies redistribution of wealth because the increase in income of the poor results into more happiness than increase in income of the very rich (Layard 2005). However the policy implications Layard tries to draw from recent studies of relative reported happiness levels suggest he underestimates the type and extent of information required to show that a particular course of social action is likely to lead to maximum happiness. Taxation is one of Layard’s policy alternatives for increasing happiness which he justifies on grounds that:

“.. natural selection has planted in us the desire to do better than other people…….This is what causes the rat race. If a person works and earns more………compared with other people. Other people lose because their income now falls relative to his…He does not care that he is polluting other people …… …... if we make taxes commensurate to the damage that an individual does to others when he earns more, then he will only work harder if there is a true net benefit to society as a whole……taxation is away of containing the rat race and we should stop apologising for its “dreadful” disincentive effects” (Layard 2005:228).

I think it might be hard to draw a line between how much tax is necessary to discourage people from overworking (so that for example people spend more time with family), and by the same token not create a disincentive to working hard at all. Not only are Layard’s specific policy application of his happiness metric open to doubt, but also there are questions about his willingness to face up to the interventionist character of his undergoing argument. Some of these policies may prompt government to undertake actions aimed at increasing happiness which may not only contradict freedom and liberty but may also boomerang and instead reduce happiness¹¹³.