The Clarence Ayres Memorial Lecture: The Paradoxes of Happiness in an Old Institutionalist Perspective

By Peukert, Helge | Journal of Economic Issues, June 2005 | Go to article overview

The Clarence Ayres Memorial Lecture: The Paradoxes of Happiness in an Old Institutionalist Perspective


Peukert, Helge, Journal of Economic Issues


In recent years, happiness research has become a strongly recognized new field of economic discourse. This contribution tries to delineate the insights and limitations of this research from a critical institutionalist vantage point. In a couple of articles on happiness research, Thorstein B. Veblen is mentioned. (1) The theoretical and intellectual affinity between Veblen's theory and path-breaking contributions in happiness research like Tibor Scitovsky's The Joyless Economy (1976), Fred Hirsch's The Social Limits to Growth (1976), and, for example, Robert Frank's Choosing the Right Pond (1985) is obvious. They are all skeptical about the assumption that changes in economic welfare indicate changes in social welfare in the same direction, if not in the same degree. Hirsch's positional goods underline Veblen's insight that economic value also depends on the relative position regarding, for example, the possessions of others. All recent authors refer to some degree to James Duesenberry, whose relative income hypothesis (1949) is directly derived from Veblen's theory of the leisure class.

In this contribution I will focus on Veblen's analysis of the paradoxes of happiness in his major work on the leisure class, The Theory of the Leisure Class ([1899] 1994). It will be shown that Veblen can be assessed as a neglected founder of happiness research. I cannot describe happiness research in detail here. (2) I will only mention the major finding of happiness research: in many countries real income has risen but self-reported subjective well-being has not (substantially) increased (Easterlin 2001). Its research strategy may be described as conceptual individualism; micro happiness functions are derived from the empirical-statistical measuring of the influences of variables on reported subjective statements of well-being.

Veblen would be very skeptical of the assertion (shared by Nobel prize winner Daniel Kahneman in his influential hedonic psychology) that "utility can and should be cardinally measured" (Frey and Stutzer 2002b, 43) and would criticize, for example, the construction of a unified pleasure and pain measure. Due to the shortcomings of hedonic individualism the contribution of Veblen to happiness research consists in the treatment of the neglected top level of the cultural and social system and his combination with an elaborated anthropological interpretation of the determinants of human behavior and the definition of a good society (Peukert 2001). In the following, we will restrict our analysis to his opus magnum and highlight Veblen's main theses on social structure, culture, and happiness.

Unhappiness and The Theory of the Leisure Class

On the first page of Veblen's Theory of the Leisure Class an explanation for widespread unhappiness can be found. "The institution of a leisure class is found in its best development at the higher stages of the barbarian culture; as, for instance, in feudal Europe.... The upper classes are by custom exempt or excluded from industrial occupations, and are reserved for certain employments to which a degree of honour attaches" ([1899] 1994, 1).

To this distinguished class belong the agents of government, warfare, religious observances, higher learning, and sports. Only a minority belongs to this group. The large majority is excluded and necessarily frustrated because it is situated at lower echelons of the stratification ladder. For Veblen it would come as no surprise that "[t]hroughout the life cycle, the well-being of better-educated persons is greater than that of less-educated, and that of whites is greater than blacks" (Easterlin 2002, ix, and 1974, 99-102). The whites and the better-educated are more often employed in activities which are attached to the above-mentioned honor and status occupations.

According to Veblen, three historical stages can be distinguished: primitive savagery, barbarism, and the modern industrial age as the highest stage of barbarism. …

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