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Unhappiness as an Engine of Economic Growth

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Book cover The Economics of Happiness

Abstract

The citizens of the US, China and India have experienced a significant decline in happiness, social capital and leisure in the past few decades, as well as an epidemic of social comparisons. This deep and long-standing social crisis is puzzling when we consider the sustained economic growth of these countries. Is there a relationship between social crisis and growth? The defensive growth approach argues that they may feed each other. The erosion of environmental and social assets caused by increased market activity limits their accessibility, inducing consumers and producers to search for substitutes in the marketplace. Defensive growth is a process whereby market goods and services progressively replace declining non-market sources of well-being and compensate for the negative externalities generated by the increased marketization of society. This process is a self-reinforcing loop: the externalities generated by the expansion of market activities induce households and producers to compensate by buying more goods, further expanding market activity. Because the flip side of increasing economic affluence is rising social and environmental poverty, the impact of defensive growth on happiness is disappointing. I conclude that declining social capital has boosted GDP, working hours and the decline in happiness in the US, China and India.

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Notes

  1. 1.

    https://www.bbc.com/news/world-asia-india-38824478, (last accessed Jun 15 2018)

    http://www.scmp.com/news/china/policies-politics/article/2082474/chinas-synthetic-drug-problem-growing-government-says, (last accessed Jun 15 2018)

  2. 2.

    https://www.economist.com/special-report/2016/07/07/a-nation-of-individuals

  3. 3.

    In Brazil trust increased by 50% in the period 1991–2006 (own calculation on World Values Survey data). Life satisfaction increased as well.

  4. 4.

    According to World Bank data, in Brazil the Gini index of income was 60.5 in 1990 and 55.6 in 2006. This is a substantial decline, although levels of inequality remain very high. https://data.worldbank.org/indicator/SI.POV.GINI?locations=BR

  5. 5.

    Other environmental examples include double glazing to defend against noise, mineral water as a substitute for tap water and private swimming pools as a response to the deterioration of local beaches. Expenditure for pollution abatement/prevention, treatment of illnesses caused by pollution, soil restoration, global warming mitigation (such as investment in energy saving, green transport and conservative agriculture) and emergencies/reconstruction after extreme climate events is a direct response to environmental degradation.

  6. 6.

    More precisely, to obtain defensive growth Eqs. (12.1) and (12.2) should substitute for the utility function used in standard growth models, while Eq. (12.4) should be added to standard models.

  7. 7.

    http://www.adultdevelopmentstudy.org/

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  1. University of Siena, Siena, Italy

    Stefano Bartolini

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  1. FLACSO-México & UPAEP, Tlalpan, Ciudad de México, Mexico

    Mariano Rojas

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Bartolini, S. (2019). Unhappiness as an Engine of Economic Growth. In: Rojas, M. (eds) The Economics of Happiness. Springer, Cham. https://doi.org/10.1007/978-3-030-15835-4_12

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