What is the goal of the economic system? What’s the point? For hundreds of years, the assumption behind Western civilization’s conception of the economy has been: Higher Income and More Goods to Consume. Coming from times when life was short, unhealthy, uncomfortable, and punctuated with starvation, this is easily understandable. But for the developed, industrialized world this is no longer true. Life is no longer short. It’s comfortable. And our lack of health is as much a result of too much to eat. So what are we striving for? Is the goal always to make more money, get more toys, and have more stuff?
Soon (this century), a majority of the world’s population will join the industrialized nations with this new lifestyle. Then what? Will we be happier? Recent research in economics indicates:
- A lack of money/income makes a person more unhappy (duh!)
- But, beyond a certain level, more money does not produce more happiness. (in the U.S., this seems to be at about $60,000 income per year).
Videos to Watch:
These two short videos feature research economists on the economics of happiness. The truth is, economists have only been researching “happiness” as something possibly separate from “income” or “wealth” for a decade or so (a brief moment in academic research time). The goal is get you thinking about how we might change our thinking or ideology of an economic system
1. The. Economics of Happiness (3.5 minutes)
Does earning a higher salary really make a person happier? Not permanently, according to GSE Affiliated Professor and ICREA-IEA Researcher Ada Ferrer-i-Carbonell. Her research in happiness economics has shed new light on what determines a person’s happiness, particularly the effects of income changes and other life events on subjective satisfaction.
2. Joseph Stiglitz – Problems with GDP as an Economic Barometer (8 minutes)
Nobel Prize-winning economist Joseph Stiglitz proposes alternatives to Gross Domestic Product (GDP) as a measurement of national economic success.
Problems With GDP as an Economic Barometer (alternate link if embedded video doesn’t display)
So what happens to our economic system, our economic life if endless growth is no longer the primary goal?
How should we measure the success of an economic system?