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Living Better on Less? Toward an Economics of Sufficiency

My last article summarised a longer paper I have just finished called “Living Better on Less? Toward an Economics of Sufficiency.” This paper reviews the social research that examines the relationship between income and happiness. The central question I ask is: How important is money to happiness?

The weight of evidence suggests that income growth tends to contribute positively to human wellbeing when people and societies have very low levels of material wealth. But once basic material needs have been met – as they generally have been in the most developed regions of the world – further increases in income tend to contribute less and less to wellbeing. The evidence even suggests that there comes a point – a threshold point which the most developed nations have already crossed – where the anticipated benefits of income growth are nullified by social and psychological phenomena such as status competition, hedonic adaptation, rising expectations, overwork, etc. While it is true that within a nation the richest people are generally happier than the poorest (no surprises there), it seems that once a moderate level of wealth has been attained, further increases in wealth play only a minimal role raising wellbeing. What this means is that if people whose basic material needs have been met continue to dedicate their lives to the pursuit of more and more wealth, they may find that they are essentially wasting their time so far as wellbeing is concerned.

This has been called the ‘income-happiness paradox,’ because it contradicts the widely held assumption that more income and more economic growth will always contribute positively to human wellbeing. After reviewing the empirical literature, the analysis proceeds to consider the various explanations for this so-called ‘paradox,’ and it also considers what implications this paradox might have for people and nations that are arguably over-consuming.

Could it be that many people in the developed world today can live better on less? And could planned economic contraction – or degrowth – actually be in our self-interest? Based on the evidence, the paper answers those questions in the affirmative, and concludes by outlining an ‘economics of sufficiency,’ both at the personal and the macro-economic levels.

The full paper is available here.

This paper is soon to be published as part of the Limits to Growth 40th anniversary at www.growthbusters.org. For more information, see:

Limits to Growth 40th Anniversary Series: http://www.growthbusters.org/home/limits-to-growth/
Take the GrowthBusters “Think Small” Pledge: http://www.change.org/petitions/all-of-us-pledge-to-think-small

4 Responses to “Living Better on Less? Toward an Economics of Sufficiency”

  1. [...] co-founder of The Simplicity Collective. This is a brief introduction to a full paper available at The Simplicity Collective website. Samuel was one of the musical contributors to the GrowthBusters Earth Day Fundraiser Soundtrack [...]

  2. John says:

    The happiness data doesn’t make sense.

    Now, it’s fair to assume that over the past 50 years women are being availed of more opportunities society has to offer. Australia has become a more inclusive society with regard to gener. This is a good thing and should make people (at least women) happier. But the data doesn’t really demonstrate this does it? Even if we aggregate we should still see an effect on happiness, unless men are less happy proportinatly the same as women are more happy.

    Given that women aren’t any happier, could I then not make the argument that women are just as happy being homemakers? That they are just as well off chained to the proverbial stove and not an active, valuable part of the workforce?

    The fact that people keep wanting to earn more and wanting buy more things is a pretty strong indication that it’s something they prefer. In fact this holds greater weight, in an analytical sense, than asking them if they are happy or not. I can lie about being happy for free, I can’t lie about buying a cup of coffee for less than the price of a cup of coffee.

    If you want to see if people are happy with more or less, give them $100 and ask them how happy they are. Then take that money away and again ask them how happy they are.

  3. Samuel Alexander says:

    Hi John,

    Thanks for your comment, although I don’t agree with you.

    If you give someone $100 they are likely to be happier than before. And if you take $100 away from them, they are likely to be less happy. But that proves or disproves nothing related to my analysis. This is because we are rarely just given money. We have to work for it. If you accept that, as you must, then the question becomes: Does working for that extra $100 bring more happiness than the ‘free time’ foregone? In other words, would people be happier with an extra $100 per week or an extra three or four hours of free time? The data suggests that in rich countries, most people will find that they would be better off with more time than with more money.

    That applies whether you are male or female.

    There is much more to say on the subject of the social changes which have occurred in recent decades with respect to gender. I can only make some brief comments now.

    You seem to imply that “home-making” so-called is not valuable because it is not paid by the formal economy, and that to leave home and work for money is somehow synonymous with freedom (and therefore happiness). I understand where you are coming from, however I think we are seeing a re-evaluation of “home-making” today, whether that home-making is being undertaken by women or men. There is honour in raising children, in preparing healthy food, in making the house a place of production (food, clothing, etc), not merely a place of consumption.

    There have been theorists who have argued that feminism got waylaid so far as feminism sought to equalise women in terms traditionally masculine conceptions of success. My point is that leaving the home for the boardroom may not have been the “path to happiness” that you seem to suggest. Of course, I’m not arguing for a return to a world where people are locked into gender specific roles. But I do want to resist your implication that home-making, whether by women or men, is somehow less valuable than paid work. I have long been an advocate for greater household self-sufficiency, and this generally implies reduced paid working hours and more home production. But there is no reason to think this home production needs to be “women’s work,” nor is there any reason to think that working from home is about being “chained to the stove.”

    Thanks again for your comment. It raises some very interesting points that I hope to develop in future posts.

  4. John says:

    I implied no such thing about the value of home making, but you did your level best to infer it. I referred only to individual preference. There are some people who would prefer to stay at home. But there are others who find it less satisfying. Years ago they had little to no choice, now there are opportunities. While some are happy to be home makers they can, some prefer to work and that’s great too. It’s the option that’s important and the option that should make at least some people happier without making others sadder.

    I think you miss my point on the happiness data generally. If you look at the happiness data across time it stays pretty much flat. Income per capita has increased and still it has remains flat. Women now have more opportunities and still it remains flat. Society has become more inclusive of different ethnic groups and still happiness flat.

    Just as you use income not changing happiness to support the thesis that people aren’t happier with more income, I can use that same evidence to support the thesis that gender and racial equality doesn’t make us happier either.

    Personally, I think it more likely that the whole study of happiness surveys is flawed. It’s not a paradox it’s data that lacks explanatory power.

  5. Samuel Alexander says:

    John, it’s called an income-happiness paradox because the evidence contradicts the widely held assumption that increases in income will always contribute to happiness.

    The evidence suggests that in recent decades people have gotten richer but that this has not increased happiness. Theorists argue that this is because (among other things) material consumption beyond a moderate level doesn’t contribute much to happiness. The fact that social progress has also been made in terms of gender and racial opportunities doesn’t change that. Yes many people have benefited from that social progress, and they may be happier for that, but those happiness gains seem to have been nullified by “social recession” in other respects. For example, sociologists like Robert Putnam and Robert Lane have presented an impressive body of evidence showing loss of community in many affluent societies, a decline of a sense of purpose and meaning in life, as well as increases in mental illnesses like depression, high stress, and anxiety. And psychologist Tim Kasser has shown that these things are more prevalent amongst those people and nations with materialistic value orientations.

    In short, there may have been beneficial social progress in some respects, but the insatiable pursuit of material wealth has brought with it many social problems that have nullified those benefits. So I understand why you are asking the questions you are asking, but in my view you draw erroneous conclusions.

    Furthermore, your neoclassical perspective doesn’t wash with me. Your underlying assumption is that if people “choose” something then that must maximise their happiness / utility. But that would only hold if human beings were perfectly rational and had full information. The alcoholic chooses to drink himself into oblivion, but does not maximise happiness. This is but an extreme example of irrational behaviour that is widespread in human societies. It is an empirically established fact that human beings often act in ways that do not maximise their happiness. If you accept that, as you must, your neoclassical assumptions no longer hold and the “consumer choice” theory of preferences crumbles. On that basis, we should look to the evidence, which is what I have done.

    The literature on income and happiness suggests that many people in affluent nations are acting “irrationally” in terms of how much time they dedicate to materialistic pursuits. This means that there is much room for people to increase their happiness by dedicating less time to earning (in jobs that are not always pleasant) and more time to things that truly bring happiness (which evidently are things like socialising with friends, relaxing, and engaging in creative activity).

    I’m not sure why you find this a “nonsense” argument. Not only is it empirically verified, but it is intuitively very plausible. Income has diminishing marginal utility. That’s obvious. There will come a point when human beings would benefit more from increases in free time rather than increases in consumption, and it seems that the rich world has already surpassed that point. This means that many people could live better on less, which is my argument.

  6. [...] build new economic systems based on notions of sufficiency rather than excess. But as I have argued elsewhere, this does not need to sound so depressing. A growing number of people are seeing the hollowness of [...]

  7. [...] new economic systems based on notions of sufficiency rather than excess. But as I have argued elsewhere, this does not need to sound so depressing. A growing number of people are seeing the hollowness of [...]

  8. [...] this summary at The Simplicity Collective quite interesting and am looking forward to reading the full paper on [...]

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