Session 3 (1): Lord Layard on Competition vs Cooperation & The Movement for Happiness

Image: Mind & Life

The Saturday morning session of the Compassion in Economics conference in Zurich was devoted to the issue of economic research on altruistic/prosocial behavior, moderated by Gert Scobel (who by the way wrote a great book on wisdom, maybe I find some time to talk about it later in my blog).

I decided to divide the posts on the sessions into more than one post as it’s easier to digest . Enjoy!

The session was started off by Lord Richard Layard, PhD, one of the key economists (together with Bruno Frey) to begin research on the relevance of wellbeing and happiness within the discipline:

Lord Layard began his presentation by pointing out the problematic nature of the assumption that free and competitive markets make: that people derive happiness from satisfying their demand for material goods in the market.

Ignoring the fact that non-market relations of people are at least as important, this assumption has lead to a large increase in income (at least in Western countries) but none in happiness. An important part of this problem is that of social comparison, the fact that we tend to not value what we have in terms of the economic comfort it gives us by itself but that we compare ourselves with those around us. 

Lord Layard continued to explain that economic is no longer a zero-sum game, but that there there can be more than the sum of its parts when we recognized how much human relationships matter. Although economic growth fueled by the creativity of humanity can be positive, it cannot contribute much to our lives when it happens on the cost of our relationships with others!

The example of the reduction of financial regulation leading up to the crisis we see that it helped to achieve faster economic growth, but on the cost of less stable markets and unemployment. The right balance between competition and cooperation was the way he put forward, pointing out that a system completely based on cooperation such as was aimed at in Communism is not exactly desirable either, as the radical limitation of our freedoms decreases our happiness as well. To demonstrate this he showed the following graph of data from the early to mid-1990s, which shows not only most ex-communist with lowest happiness scores but also that money does not make a difference above a certain average income.

Of course these scores are based on self-reported, yet the self-reported satisfaction with one’s life does strongly correlate to peer-reported ones. The measuring method is furthermore supported by neuroscientific evidence. In response to the graph, the Dalai Lama asked how this would relate to other research he heard of that had shown that happiness on Cuba is actually higher than in the UK? Lord Layards reply was that this would probably be based on the happiness-score seen as relative to the low income on Cuba.

Luckily however Western governments are increasingly recognizing that GDP per capita is no longer adequate as single measurement of the wellbeing of its population and that in the UK governments are establishing other, wellbeing-related, indicators as alternatives to GDP.

Lastly he pointed to the decreasing trust in our societies to stress the importance of focusing more on our inner lives, relationships and nurture trust. To the question “Do you think most other people could be trusted” he referred to a decrease over time from 60% in the US and UK to now just 35%. He pondered on the possibilities of an increasingly individualistic society that sees others as competitors  rather than cooperators as reason for this shift. Another possibility was the global movement from rural (smaller communities-> easier to trust)  to urban (more anonymous-> less trust) areas. He furthermore mentioned that trust and income equality were correlated, with the Nordic countries and the Netherlands scoring highest.

As direction for possibilities to nurture more cooperation and trust in our too competition-biased society he suggested education as crucial to build an ethos of mutual respect. In the workplace he emphasized the importance of rewarding group efforts and team work. In general he also advocated the need to focus more on our mental well-being, a cause for which he shortly mentioned the “Movement for Happiness” (everybody sign up!!!) that is to be launched this September.

The Dalai Lama added to this by pointing out the fact that all the gatherings of the powerful in the world such as G8 or G20 are overly focused on purely material economic matters, wondering why they did not spend more time and efforts on topic such as trust or mental well-being? What we need is to recognize that we are all part of one world to overcome disruptive notions of “us and them”.

In the short discussion following Lord Layards presentation, Ernst Fehr came back to the central role of social comparison, stating that economic growth might heighten the income of all groups but because our happiness depends on how much better we are off compared with our neighbours we are rarely happy with what we have. He continued to emphasize that this is exactly an entry point for insights from the Buddhist traditions and practices, to help train our brain in helpful ways and not compete for material goods anymore but focus more on happiness instead.

Next was William Harbaugh on economic research on altruistic behavior in the form of giving to charity, but more on that in the next post!