The Economics of Happiness


John Ikerd


Recently, I received an e-mail request from a British publisher to review an Italian economist's proposal to write a book entitled “The History of Happiness in Economics.”  Such is the nature of our electronically interconnected world.  The proposal included a couple of published papers in which the author, Luigino Bruni, traced the historical development of the discipline of economics.  The papers were filled with references, footnotes, and the typical economic jargon, but nonetheless, provided some interesting insights into the past and potential future of farming.


Only within the past century has economics become the dismal science – only after abandoning the “pursuit of happiness” for the “pursuit of wealth.”  Early nineteenth century economists, including notables such as Britain's Adam Smith and Thomas Malthus, considered happiness to be the ultimate goal of all economic activity.  Smith wrote of the “wealth of nations” but his writings reflect a clear understanding that one's pursuit of wealth should not take precedent over one's social responsibilities.  Malthus, who suggested population ultimately would outstrip our ability to produce food, also suggested that Smith assumed too strong a connection between increases in wealth and increases in happiness.  Neither assumed that greater wealth was synonymous with greater happiness.  In the later half of the century, the focus of economics shifted toward satisfying individual human “wants,” as well as needs, – with a clear understanding that human “wants” were affected by human relationships.


However, at the turn of the twentieth century, Vilfredo Pareto, an Italian, set about to free economics from the subjectivity of sociology and psychology, by focusing on the “revealed preferences” rather than “happiness.”  To Pareto, all that mattered was whether a person consistently chose one thing over another.  Obviously, rational persons would make choices consistent with their wants and needs.  Economists should focus on consumer preferences and choices, he suggested, and let the sociologists and psychologists worry about whether such choices actually make people happier.  Pareto's theories eventually were adopted by other economists, primarily because it allowed economics to focus on observable and measurable human behavior, rather than some intangible concept of human happiness.


In the early 1900s, Alfred Marshall, another Brit, conceded that economics no longer dealt directly with human “well-being,” his term for happiness, but rather with the “material requisites” of it.  Latter twentieth-century economists, including England's John Hicks and America's Paul Samuelson, made little distinction between wealth and happiness.  They wanted to turn economics into a “hard science.”  They needed objective, quantifiable economic variables to accommodate their mathematical and statistical models.  Maximizing profit, income, or wealth was equivalent to maximizing satisfaction or happiness, as far as they were concerned.  Critics questioned the lack of capacity for compassion or altruism in their rational, “economic man.”  But, whatever compassion or altruism the “economic man” might possess, he could reflect in “his” rational choices, they replied.  They ignored the fact that revealed preference theory supported optimum social well-being only if altruism is strictly “impersonal” – showing no preference for one person over another.  Thus, the dismal science of today was born.

Happiness always has been a matter of discussion and debate among the world's greatest philosophers.  It was accepted as the motive of all purposeful human activity.  The “hedonists” philosophers equated happiness to sensual pleasures – to individual, personal experiences.  Another group of philosophers, including Aristotle, used the term eudaimonia for happiness.  Eudaimonia is inherently social in nature – it is realized by the individual, but only within the context of family, friendships, community, and society.  Aristotle's happiness, social happiness, is a natural consequence of positive personal relationships.  This “social happiness” was considered to be a “by-product” of actions taken for their own sake – not to achieve some sensory satisfaction, but because they are “intrinsically good.”  In essence, Aristotle and his followers believed that happiness was not something to be pursued, but instead, was a natural consequence of “righteous living.”


To the extent that contemporary economics includes any remaining element of happiness, it most clearly is “hedonistic” in nature rather than eudaimonic.  Eudaimonia depends on “personal relationships,” not on some “impersonal altruism.”  Thus, the current pursuit of economic wealth is a pursuit of individual, hedonistic or selfish sensory pleasure.  And, pursuit of individual wealth, within this context, inevitably leads to the exploitation of other people and the degradation of human relationships.  Thus, the pursuit of “individual wealth” quite logically has diminished our “social happiness.”


What hard evidence do we have of this perverse relationship between wealth and happiness?  We need only look at trends such as the rising cost of law enforcement and increasing numbers of prisoners, increasing number of lawyers and rising costs of civil litigation, increasing births to unwed mothers and rising poverty in single-parent households.  All of these trends are symptoms of increasingly dysfunctional human relationships and declining social happiness, and all have occurred during a time of rising national wealth.


Robert Putnam, a Harvard Political Scientist, clearly documents our growing social disconnectedness in his book, Bowling Alone.  He evaluates a multitude of measures of social involvement, ranging from voting in elections, to belonging to civic and professional organizations, to joining bowling leagues, to visiting friends and neighbors.  He concludes that Americans are only about 30 to 50 percent as socially connected today as we were in the late 1950s.


As Aristotle might have predicted, our growing disconnectedness occurred as America was abandoning all social and moral constraints to pursue individual wealth and the promotion of maximum economic growth.  During the early part of the twentieth century, Americans tempered their economic ambitions with concern for their fellow citizens.  They restrained corporate greed at the turn of the century by supporting strong antitrust legislation.  They supported Roosevelt's New Deal programs to care for the needy and help lift the nation out of recession.  Most supported the Civil Rights movement of the 1960s.  But, since the 1960s, there has been little societal or political restraint to the unbridled pursuit of individual economic self-interests.


Aristotle might also have the predicted the consequences for our national happiness.  Putnam points out that the rate of mental depression among the last two generations of Americans has increased roughly “tenfold” – these being the generations most socially disconnected – over mental depression in the 1950s.  Also, between 1950 and 1995, the rate of suicide among American adolescents more than “quadrupled” and among young adults nearly “tripled.”  Less serious, but no less significant, incidents of  “malaise” – headaches, indigestion, and sleeplessness, show patterns similar to suicide and mental illnesses.  Between the late 1970s and late 1990s, surveys indicate that each new generation, on average, is “unhappier” than the previous generation.  In short, as each generation has become increasingly disconnected, the nation as a whole has become increasingly mentally ill and physically miserable.  As we have become a nation of greater wealth, we have become a nation of growing unhappiness.


In farming, the pursuit of wealth is seen in a relentless trend toward larger, more specialized, farming operations, as farmers are encouraged to give priority to productivity and profitability – to farm for the bottom line.  The bottom line has encouraged farms to grow larger, which is possible only by farmers acquiring land from their neighbors.  Thus, some farmers had to fail so others might succeed; meaning farmers had to hope, perhaps subconsciously, that their neighbors would be the ones to fail, because they would need their neighbor's land to survive.  Such hopes are hardly conducive to building strong relationships among neighbors.  As families have been forced out of farming, they have left many rural communities in decline and decay, without enough people to support local schools, churches, health care facilities, or main street businesses.


The pursuit of unbridled economic self-interest has turned farms into “factories,” pitting neighbor against neighbor.  For example, producers and community leaders, expecting profits and tax revenue from large-scale confinement animal feeding operations, are confronted by community members who live downwind or downstream, who suffer from the inevitable pollution of air and water.  The social fabric of many rural communities has been split apart by such conflicts.  Eventually, the corporate operations will leave these communities, when profit prospects look better elsewhere, leaving a splintered community with the mess to clean up.


Some may argue that this pursuit of wealth has actually brought greater happiness to rural America.  But, ask them where they expect their children to live.  Ask farmers if they even want their children to be farmers.  Ask rural residents how many of the “best and brightest” – as they call young people with opportunities elsewhere – will choose to stay or return to the communities where they grew up.  Rural people want their children to be happy, and thus, they encourage those who have a choice to live elsewhere.


So, how are we to find happiness?  First, we must have the courage to challenge conventional economic thinking that “pursuit of wealth” means “pursuit of happiness.”  Perhaps, as Marshall said, economics is best viewed as being about acquiring some of the “material requisites” for happiness, but not about happiness.  Next, we must realize that happiness, in any sense other than hedonistic sensory pleasure, depends on the quality of our personal relationships.  Finally, we must understand that happiness is a “by product” of “right living” – not something that we pursue, but instead something that comes to us.


What does this have to do with sustainable farming?  Everything.  Sustainable farming is not about becoming wealthy, but instead, it is about living a good life.  As farmers find ways to make a decent living, while caring for the land and caring for other people, not only are they building a sustainable agriculture for the future, they are opening the doors to happiness.