ECONOMY

Higher income does not bring happiness, but less tax might

Insofar as it touches on the subject of human happiness, mainstream economic theory maintains that it is directly related to disposable income. Economist Richard Layard, emeritus professor at the London School of Economics and Political Science, founder and director of LSE’s Center for Economic Performance and a Labor member of the House of Lords, says, however, that income is not the best gauge of happiness. Layard, who has lectured on the subject in recent years and written a book, says that other important factors influencing happiness are quality leisure time, the quality of family and friendly relationships and the quality of the natural environment and the workplace. The influence of these factors helps to explain that, while humans are, on average, three times as wealthy as they were 50 years ago, their happiness has not increased, he maintains. There are certain differences between advanced and developing societies. Studies in the former have shown that people are not any happier than they had been at the end of World War II even though incomes have increased several times. In the Third World, however, an increase in disposable income significantly boosts happiness, because it helps procure essential goods and services that were previously out of reach. In advanced countries, happiness increases if people experience an improvement relative to others in their society. Studies in Western urban centers have found that factors such as criminality, frayed or ruptured relationships, the pace of work and the polluted environment affect happiness adversely. Urban people may enjoy technological advantages but the relationships that matter most to them, those with their family, friends, associates and the local community become more distant. Studies also show that religion plays a positive role in happiness because established religions provide a support network that other social, state and community institutions fail to provide. Deep belief in God also provides assurance against the adversities of life. Layard claims that the state can increase overall happiness through redistributive taxation. The gain in happiness for those with lower incomes is far greater than the relative decline for those with higher incomes. Societies with a higher level of welfare provision are the happiest, Layard says.