Life, Liberty, and the Pursuit of Happiness: the Economics of a Better Planet

Reflecting on the state of humanity, it becomes abundantly clear that there are a number of problems that continue to plague our world, and many of these have resulted directly from human activities.  Among this multitude of problems are the continual destruction of the environment and the overconsumption of the resources necessary for our very lives. In front of problems such as these, I start to wonder what it is that people really want, and whether such problems actually limit their ability to obtain it.  The things that really matter in our lives were seemingly identified by Thomas Jefferson in the Declaration of Independence, when he referenced our inalienable rights to life, liberty, and the pursuit of happiness. Surely we would all agree that if everybody were provided with these, then the world would be a fine place to live.  Thus, it seems to follow that the lifestyles that we adopt and the systems to which we belong should function to provide these for us in the most efficient way possible.

Mark 1Economics is the study of how a society manages its scarce resources, so it would appear that our economic system should be judged according to how well it is able to use our scarce resources to provide for the inalienable rights that represent the things we truly value. The economic system that dominates our culture functions under the premise that our scarce resources should be converted as efficiently as possible into money, and that the money produced will then be used to purchase the happy lives that we desire.  When we look at the data, however, we see that this great promise of modern economics fails to hold up. The growing GDP has not made a higher percentage of people report themselves as “very happy,” and our ability to use money to purchase life satisfaction plateaus at a household annual income of around $75,000 in the most expensive places in the country to live (Myers and Diener 1995, Kahneman and Deaton 2010). Furthermore, having a larger carbon footprint, and thus being a more successful consumer, is not correlated with happiness either (Burlager 2013).  The reality is that spending our money as we currently do is failing to provide the happiness we desire, and the economic system we use to judge everything in our lives is flawed. If money does not buy us happiness, what should we do?Mark 2

The solution is to use our resources in the way that directly generates the most life and happiness possible.  In many cases this may be converting those resources into money, as we currently do, and spending that money more wisely than we have in the past.  One way to spend our money more wisely, for instance, is to give it to other people who need it more than we do.  It has been found that giving our money away brings more happiness to our lives than spending it on ourselves, and it also can be used to provide a true necessity for the less fortunate person to whom the money was given (Dunn et al. 2008). In other instances, however, the inherent ability of the resources themselves to improve the overall quality of human life will be more significant than what money could buy, and so converting these resources to money would entail an opportunity cost greater than the capital that would be generated. Thus, using the same microeconomic principles as we normally do and simply applying them to maximize happiness instead of money, we can achieve more productive results.

One area where this shift in economic thinking can be clearly applied is in how we make decisions that impact the natural environment, as the environment itself has been shown to play a major role in an individual’s life satisfaction. When the scenic amenity of the natural surroundings of a house was scored from 1-10, with a 1 being equivalent to an urban slum lacking any natural presence and a 10 being a home perched atop a beautiful mountain range, it was found that an increase of one in the scenic amenity score given to someone’s house produced an increase in life satisfaction equivalent to that expected from a salary increase of $14,000 per year (Ambrey and Fleming 2011).

In many cases, an increase of one point on the scale is as simple as planting a tree. Yet, the natural beauty that generates this happiness in our lives is constantly being destroyed. Similarly, a small reduction in air pollution produced an increase in life satisfaction equivalent to a $5,000 increase in annual income (Ambrey et al. 2014). In the context of a megacity containing 20 million people, the opportunity cost in terms of happiness that is incurred by polluting the air is thus valued at $100 billion. If happiness were being valued directly instead of valuing money as a disappointing means to happiness, then our environmental decisions would undergo a dramatic shift. In China, 32% of all variation on individual happiness can be explained by the amount of air pollution experienced on a daily basis alone.  For context, income and education combined explain 50% of variation on happiness (Zhengtao et al. 2013). These facts are startling, but they identify more clearly the failures of our current economic system in the effort to provide happiness, and they point directly to an alternative method of evaluating costs that more directly considers the ability of the natural world to make life better.

We need to begin thinking about the opportunity costs for people living in the first world, including increased levels of ADHD, poor academic performance, and increases in depression all associated with reduced exposure to nature, as well as in the third world, where life itself is threatened more directly by the environmental changes that are already beginning to make life more difficult (Louv 2009). Additionally, the costs incurred by future generations and the limits to their rights to life and happiness that we are imposing must be considered when making major decisions. We also need to think about marginal utility in a more useful way, considering the life and happiness that can be produced from our natural resources instead of considering the wealth that can be extracted. If everyone began to operate within a system such as this, the change would be immediate.  People would not only live more sustainably, but would be happier and more satisfied with life in a more just and beautiful planet.

Take a look at this Thai life insurance commercial, which portrays what an individual who thinks in this way would look like: http://m.youtube.com/watch?v=632CHpeHYZE

References

1. Myers David G., and Ed Diener. “Who is happy?” Psychological science 6.1 (1995): 10-19.

2. Kahneman, Daniel, and Angus Deaton. “High income improves evaluation of life but not emotional well-being.” Proceedings of the National Academy of Sciences 107.38 (2010): 16489-16493.

3. Burlager, Samantha. “Carbon Can’t Buy Happiness: An Analysis of Ecological Footprints and Happiness of University Students in the City of David, Panama.” (2013).

4. Dunn, Elizabeth W., Lara B. Aknin, and Michael I. Norton. “Spending money on others promotes happiness.” Science 319.5870 (2008): 1687-1688.

5. Ambrey, Christopher L., and Christopher M. Fleming. “Valuing scenic amenity using life satisfaction data.” Ecological Economics 72 (2011): 106-115.

6. Ambrey, Christopher L., et al. “Estimating the cost of air pollution in South East Queensland: an application of the life satisfaction non-market valuation approach. Ecological Economics 97 (2014): 172-181.

7. Li, Zhengtao et al. “To what extent does air pollution affect happiness? The case of the Jinchuan mining area, China.” Ecological Economics 99 (2014): 88-89.

8. Louv, Richard. “Nature Deficit Disorder.” Resurgence Magazine 254 (2009).

MarkAbout the author: Mark Painter is a senior Biology major and Spanish minor at the University of St. Thomas

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