Money. Again.

Stop me if you think that you've heard this one before. No preamble:

"But there is a much bigger problem, one that challenges the very foundation of the presumed link between per-capita G.D.P. and economic welfare. That’s the assumption, traditional in economic models, that absolute income levels are the primary determinant of individual well-being."

It's déjà vu all over again, as they say. I've challenged this before (see here for GDP, here for money and here to hammer the point home), and of course money-centrism remains misconception number one about the practice of economics, especially the type of welfare economics the article is talking about. Again, I can only reiterate that agnosticism over people's likes and dislikes is a tenet of the practice of economics, and assumption and approximation only serve to make our questions answerable.

Getting off that familiar track, this instance is actually especially fun because it comes from a New York Times article which begins:

"DOES money buy happiness? This week, Senator Byron Dorgan, Democrat of North Dakota, will join a long line of people who have taken serious stabs at trying to answer that thorny question. He will hold a hearing exploring whether traditional economic measures like per-capita income accurately capture people’s sense of well-being."

Strange how Senators spend their time, really. Surreality aside, Robert Frank, the author of the article, does cite some neat hypotheses on the money issue, so I'll try to forget the economics equals money lament for a second. The object of investigation is how income inequality affects general wellbeing.

"[surveys find] that when everyone’s income grows at about the same rate, average levels of happiness remain the same. Yet at any given moment, the pattern is that wealthy people are happier, on average, than poor people. Together, these findings suggest that relative income is a much better predictor of well-being than absolute income."

That's probably bad news for the Senator. I propose Dorgan's Razor: to make everyone happy, make each person richer than everyone else. Oh dear. Is that a depressing impossibility result? If everyone had the same income, would we all be miserable because we were all no better off than anyone else? Seems a little extreme. Perhaps that points to the weirdness of the money metric generally.

It's not all bad news, though:

"Yet in many other categories, greater levels of absolute income clearly promote well-being, even in the richest societies. The economist Benjamin Friedman has found that higher rates of G.D.P. growth are associated with increased levels of social tolerance and public support for the economically disadvantaged. Richer countries also typically have cleaner environments and healthier populations than their poorer counterparts."

I see this as broadly similar to the importance of economic growth for the poor; whatever the value of GDP or income as a measure of individual wellbeing, it's surely the case that societies with more resources can simply afford more, in the truest sense. Those societies can afford more social spending, more sacrifice of stuff for environment, more health; the equivalent of poor countries being able to afford more when less people have to break their backs in subsistence farming.

It's also related to things like the pension "crisis" in aging countries like America, Japan and Britain. The more stuff there is to go round, the less acute the problem of providing "enough" for both the workers and the retired becomes, regardless of how many of each type there are. Further still, it's related to philanthropy, which this article contorts itself to provide an evolutionary explanation for. Philanthropy on the Gates Foundation scale cannot exist without affluence.

Senator Dorgan should be applauded for asking the question of what the goal of GDP growth really means for the wellbeing of the population. A richer set of goals could well be a good thing; perhaps we would be willing to sacrifice some income for greater equality, a healthier environment or the alleviation of global poverty. It's important, though, to ask about the value of affluence not just for the individual but on a large scale too.