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People walk to an Amtrak train in the Moynihan Train Hall in New York City on Sept. 15, 2022.Spencer Platt/Getty Images North America
John Rapley is a political economist at the University of Cambridge and the managing director of Seaford Macro.
There are a couple of caveats to the current tale of the buccaneering American economy. The U.S. dollar is inflated, the stock market boom is lopsided and it’s too early to say how long the American recovery will last. Nonetheless, the fact is that, for the time being, Americans are richer than they’ve ever been.
As the COVID-19 pandemic has eased, the United States has raced ahead of its Western peers. Whereas economies in Europe and Canada are still bumping along more or less where they were before pandemic lockdowns, the U.S. has bounced back strongly. The result is that American gross domestic product per capita now stands some 20 to 50 per cent higher than its G7 partners, depending on the country.
Add in that Americans pay less in taxes than the rest of us, and they’re taking home up to twice as much money as we do. All that money, in turn, has translated into more saving and thus greater wealth. The U.S. stock market has been outperforming its rivals by some distance and, as a result, the average American is now more than a third richer than before the pandemic.
Yet for all that, surveys of self-reported happiness reveal them to be less satisfied with life than their peers, including us Canadians. And while surveys of happiness are problematic, the objective evidence makes it hard to disagree that Americans are not, on average, happier for being richer. On the contrary, what are known as deaths of despair, which include suicides and drug deaths, have become so severe stateside that the country’s average life expectancy has begun going backward.
This puzzles economists. In the liberal blogosphere commentators are mystified that Americans just don’t get how good they have it. Whereas good economic times should translate into a landslide victory for an incumbent President, Joe Biden is instead floundering in the polls.
Mainstream economic theory presumes humans to be utility maximizers – or, as a colleague of mine once put it rather crudely, people want more stuff, and the more stuff they have, the happier they are. But while the assumption that more money equals more utility is treated as canonical in mainstream economic theory, there’s surprisingly little evidence for the belief.
A half-century ago, the economist Richard Easterlin uncovered what came to be known as the Easterlin paradox: the discovery that while a rise in income boosts an individual’s happiness, raising the average income of society as a whole doesn’t.
It would seem that what makes people happier isn’t being richer than they were, but being richer than their neighbours. Equally, there’s some evidence that what really benefits a society as it gets richer is not that it has more money, but what it does with it.
Europeans do have reasons to be unhappy, not least of which is the darkening mood of the continent’s politics, with its rising xenophobia and increasingly sharp-edged populism.
Still, European societies may record higher levels of contentment than the U.S. because they have more generous welfare provisions and abundant holidays, which reduce the anxiety that so bedevils many Americans.
Our understanding of the economics of happiness is still in its infancy. But we do know that some of the most reliable predictors of contentment, such as happy family life, bear at most only a partial relationship to income. And you just have to scan the self-help section of any bookstore to realize that the secret of human well-being remains very much a live topic.
Tell that to the average politician, though, whose campaign pitch is almost certain to be headlined by a promise to boost growth. As the American enigma reveals, it’s not obvious that growth, or at least growth alone, is what people want at this moment. What they might instead use from their leaders is a bit more imagination.
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