Economics: Does economic growth make people happier? The question is an especially interesting one to pose at this point in Ireland's history, writes Jim O'Leary.
The economy has experienced extraordinary growth over the past decade or so. Since 1993, in fact, real GDP per capita has more than doubled. But do Irish people feel twice as happy or twice as satisfied with their lives? Do they feel any happier or any more satisfied?
Can we even begin to answer such questions? Are happiness and life satisfaction measurable at all? There's a fair amount of scepticism abroad on this issue, but there's also a significant number of social scientists working in the field of measuring and analysing human happiness. How do they go about it? Basically, by asking people how they feel.
Since 1973, the European Commission has been carrying out regular surveys of public opinion across the member states of the EU - the Eurobarometer surveys.
Mostly, these surveys are concerned with exploring public attitudes towards issues relating to European integration, but they also contain questions about people's life experience.
A regular question is one designed to discover how satisfied people are with the lives they are leading.
So, how have Irish people been responding to this question since the early 1990s? Well, in 1993, 84 per cent of Irish respondents described themselves as either "very satisfied" or "fairly satisfied", with 15 per cent categorising themselves to varying degrees as not satisfied.
In the early Celtic Tiger years there was a steady increase in satisfaction, such that by 1997, the proportions satisfied and not satisfied were 91 per cent and 9 per cent respectively.
Over the next six years, the level of satisfaction trended downwards again. By 2003, the proportions satisfied and not satisfied, at 85 per cent and 11 per cent respectively - with 4 per cent "don't knows" - were very similar to what they had been a decade earlier.
Curiously, the latest Eurobarometer survey suggests a sharp improvement, with the proportion satisfied rising to 93 per cent and the proportion not satisfied dropping to 7 per cent.
Overall, the evidence from the Eurobarometer surveys suggest that rapid economic growth has not been associated with a significant increase in the life satisfaction of Irish people.
An objection to this conclusion is that the "satisfied-not satisfied" dichotomy is too crude to capture changes in the degree of satisfaction.
However, a more refined analysis does not alter the picture. Back in 1993, 32 per cent of respondents described themselves as "very satisfied" and 52 per cent as "fairly satisfied". By 2003, these proportions had become 28 per cent and 57 per cent respectively.
Again, the 2004 survey indicates a sharp and arguably aberrant change of mood, with 39 per cent "very satisfied" and 54 per cent "fairly satisfied". But even accepting the 2004 results at face value, the point remains that the extraordinary economic expansion of the 1993-2004 period appears to have yielded little by way of enhanced life satisfaction.
How can this apparent conundrum be resolved? An obvious candidate explanation is that the rapid growth in average incomes, a concomitant of rapid GDP growth and a pleasant thing in itself, has been accompanied by unpleasant phenomena like increased stress and congestion.
This explanation takes a quality of life perspective: income is just one element in a person's quality of life; other elements include health status, quality of family relations, time available for leisure activity and so on.
The argument here is that while rising income may make people happier, all other things equal, it may not make people any happier if, at the same time, their health and their family relations are being compromised by heightened stress and their leisure activities are being crowded out by ever-increasing commuting times.
Looked at from this perspective, one could argue that the faster the increase in the pace of economic activity and the more acute the pressure on an economy's productive capacity, the more likely it is that the positive effect of rising real incomes on life satisfaction will be offset by the negative effects of stress, congestion, dislocation and so on.
This sort of analysis would seem to suggest that there is a threshold rate of economic growth beyond which average levels of happiness or satisfaction begin to decline. The corollary is of course that at growth rates below that threshold, average levels of life satisfaction are increasing. Applied to the recent Irish experience, the implication is that economic activity has been expanding at too rapid a rate and this is the explanation for our failure to convert the huge rise in GDP per capita into a sustained improvement in life satisfaction.
However, the conundrum presented by the combination of rising incomes and unchanged levels of happiness or life satisfaction is not a uniquely Irish phenomenon. It is a universal phenomenon, at least amongst the economies of the developed world, and it is not readily explicable in terms of the stress and congestion that accompanies rapid economic transformation.
Take the EU as a whole, for example. This is an economy where GDP between 1993 and 2004 rose at an annual average rate of just over 2 per cent, fast enough to deliver an appreciable rise in material living standards but not so fast, one would have thought, as to generate significant welfare-reducing consequences in terms of greater stress, congestion and the like. Still, the Eurobarometer surveys paint a picture of a virtually static average satisfaction level across the EU as a whole since the early 1990s.
This brings me to the resolutions of the conundrum that are most favoured in the literature. The first is the notion of habituation, by which is meant people's strong tendency to adapt to new circumstances. As living standards rise, so the standard against which people benchmark their satisfaction also rises, and at broadly the same rate over time.
The second is the notion of rivalry, which connotes people's tendency to position themselves relative to others. As the living standards of others rise, so my living standards must rise by at least as much in order to preserve my level of satisfaction.
Figuring out the implications of all this is a work in progress. When I've made sense of it all, I'll come back to the subject. In the meantime, I'll sign off with the suggestion that that hackneyed catchphrase "It's the economy, stupid" is a little off-target. "It's not just the economy, stupid" is a bit closer to the mark.
