Why having more no longer makes us happy
The formula of human well-being used to be simple: Make money, get happy. So why is the old axiom suddenly turning on us?Posted Apr 2, 2009
The doctrinaire economist’s answer is that no particular commodity matters all that much, because if we run short of something, it will pay for someone to develop a substitute. In general this has proved true in the past: Run short of nice big sawlogs and someone invents plywood. But it’s far from clear that the same precept applies to coal, oil, and natural gas. This time, there is no easy substitute: I like the solar panels on my roof, but they’re collecting diffuse daily energy, not using up eons of accumulated power. Fossil fuel was an exception to the rule, a one-time gift that underwrote a one-time binge of growth.
This brings us to the third point: If we do try to keep going, with the entire world aiming for an economy structured like America’s, it won’t be just oil that we’ll run short of. Here are the numbers we have to contend with: Given current rates of growth in the Chinese economy, the 1.3 billion residents of that nation alone will, by 2031, be about as rich as we are.
If they then eat meat, milk, and eggs at the rate that we do, calculates ecostatistician Lester Brown, they will consume 1,352 million tons of grain each year — equal to two-thirds of the world’s entire 2004 grain harvest. They will use 99 million barrels of oil a day, 15 million more than the entire world consumes at present. They will use more steel than all the West combined, double the world’s production of paper, and drive 1.1 billion cars — 1.5 times as many as the current world total. And that’s just China; by then, India will have a bigger population, and its economy is growing almost as fast. And then there’s the rest of the world.
Trying to meet that kind of demand will stress the earth past its breaking point in an almost endless number of ways, but let’s take just one. When Thomas Newcomen fired up his pump on that morning in 1712, the atmosphere contained 275 parts per million of carbon dioxide. We’re now up to 380 parts per million, a level higher than the earth has seen for many millions of years, and climate change has only just begun.
The median predictions of the world’s climatologists — by no means the worst-case scenario — show that unless we take truly enormous steps to rein in our use of fossil fuels, we can expect average temperatures to rise another four or five degrees before the century is out, making the globe warmer than it’s been since long before primates appeared. We might as well stop calling it earth and have a contest to pick some new name, because it will be a different planet. Humans have never done anything more profound, not even when we invented nuclear weapons.
How does this tie in with economic growth? Clearly, getting rich means getting dirty — that’s why, when I was in Beijing recently, I could stare straight at the sun (once I actually figured out where in the smoggy sky it was). But eventually, getting rich also means wanting the “luxury” of clean air and finding the technological means to achieve it. Which is why you can once again see the mountains around Los Angeles; why more of our rivers are swimmable every year. And economists have figured out clever ways to speed this renewal: Creating markets for trading pollution credits, for instance, helped cut those sulfur and nitrogen clouds more rapidly and cheaply than almost anyone had imagined.
But getting richer doesn’t lead to producing less carbon dioxide in the same way that it does to less smog — in fact, so far it’s mostly the reverse. Environmental destruction of the old-fashioned kind — dirty air, dirty water — results from something going wrong. You haven’t bothered to stick the necessary filter on your pipes, and so the crud washes into the stream; a little regulation, and a little money, and the problem disappears.
But the second, deeper form of environmental degradation comes from things operating exactly as they’re supposed to, just too much so. Carbon dioxide is an inevitable byproduct of burning coal or gas or oil — not something going wrong. Researchers are struggling to figure out costly and complicated methods to trap some CO2 and inject it into underground mines — but for all practical purposes, the vast majority of the world’s cars and factories and furnaces will keep belching more and more of it into the atmosphere as long as we burn more and more fossil fuels.
True, as companies and countries get richer, they can afford more efficient machinery that makes better use of fossil fuel, like the hybrid Honda Civic I drive. But if your appliances have gotten more efficient, there are also far more of them: The furnace is better than it used to be, but the average size of the house it heats has doubled since 1950. The 60-inch TV? The always-on cable modem? No need for you to do the math — the electric company does it for you, every month.
Between 1990 and 2003, precisely the years in which we learned about the peril presented by global warming, the United States’ annual carbon dioxide emissions increased by 16 percent. And the momentum to keep going in that direction is enormous. For most of us, growth has become synonymous with the economy’s “health,” which in turn seems far more palpable than the health of the planet. Think of the terms we use — the economy, whose temperature we take at every newscast via the Dow Jones average, is “ailing” or it’s “on the mend.” It’s “slumping” or it’s “in recovery.”
We cosset and succor its every sniffle with enormous devotion, even as we more or less ignore the increasingly urgent fever that the globe is now running. The ecological economists have an enormous task ahead of them — a nearly insurmountable task, if it were “merely” the environment that is in peril. But here is where things get really interesting. It turns out that the economics of environmental destruction are closely linked to another set of leading indicators — ones that most humans happen to care a great deal about.
3. “It seems that well-being is a real phenomenon”: Economists discover hedonics
Traditionally, happiness and satisfaction are the sort of notions that economists wave aside as poetic irrelevance, the kind of questions that occupy people with no head for numbers who had to major in liberal arts. An orthodox economist has a simple happiness formula: If you buy a Ford Expedition, then ipso facto a Ford Expedition is what makes you happy.
That’s all we need to know. The economist would call this idea “utility maximization,” and in the words of the economic historian Gordon Bigelow, “the theory holds that every time a person buys something, sells something, quits a job, or invests, he is making a rational decision about what will … provide him ‘maximum utility.’ If you bought a Ginsu knife at 3 a.m. a neoclassical economist will tell you that, at that time, you calculated that this purchase would optimize your resources.” The beauty of this principle lies in its simplicity. It is perhaps the central assumption of the world we live in: You can tell who I really am by what I buy.
Yet economists have long known that people’s brains don’t work quite the way the model suggests. When Bob Costanza, one of the fathers of ecological economics and now head of the Gund Institute at the University of Vermont, was first edging into economics in the early 1980s, he had a fellowship to study “social traps” — the nuclear arms race, say — in which “short-term behavior can get out of kilter with longer broad-term goals.”
It didn’t take long for Costanza to demonstrate, as others had before him, that, if you set up an auction in a certain way, people will end up bidding $1.50 to take home a dollar. Other economists have shown that people give too much weight to “sunk costs” — that they’re too willing to throw good money after bad, or that they value items more highly if they already own them than if they are considering acquiring them. Building on such insights, a school of “behavioral economics” has emerged in recent years and begun plumbing how we really behave.
The wonder is that it took so long. We all know in our own lives how irrationally we are capable of acting, and how unconnected those actions are to any real sense of joy. (I mean, there you are at 3 a.m. thinking about the Ginsu knife.) But until fairly recently, we had no alternatives to relying on Ginsu knife and Ford Expedition purchases as the sole measures of our satisfaction. How else would we know what made people happy?