How much should the government intervene in a country’s economy? If you ask hardcore capitalists, they’ll tell you as little as possible – let the market sort itself out. But an emerging strong trend in economics claims that government intervention and citizen wellbeing are tightly connected.
A new study adds more credibility to that idea, finding that “in countries where governments intervene more frequently in the economy there is a higher degree of self-reported happiness among citizens.”
It’s still probably the most heated political debate in the world. Democracies all over the planet are still witnessing a fight between the left and the right side of the political spectrum. The left generally argues for more interventionist policies like generous unemployment protections and welfare benefits, while the right asks that we leave the market alone to regulate itself. The fact that there is no agreement on what is the “best” intervention policy shouldn’t surprise anyone – many variables differ from case to case and it’s hard to draw a general line. However, due to the complexity of policy-making, we don’t even have definite metrics to assess the success of a certain measure. Economic growth, unemployment, per capita productions and levels of inequality are all relevant metrics, but no combination has established itself as a golden standard.
However, in a recent paper, a group of British researchers took a step back from that approach and looked at a much more basic metric: happiness. The release reads:
“In a recently published research paper, we take a step back from purely economic indicators of well-being and instead ask: What public policies lead to citizens living lives that they themselves deem satisfying? In other words, what public policies promote greater human happiness?”
Patrick Flavin, Alexander C. Pacek and Benjamin Radcliff analyzed data across 21 industrialised democracies between 1981 and 2007. In order to rule out other explanations, researchers compensated for a host of individual (such as marital status, education, personal health, employment status, and church attendance) and country (such as GDP, economic growth, average levels of citizen trust) characteristics. Of course, there is always a risk when compensating for factors like this, but their results showed a strong statistic significance. Basically, citizens report being happier in countries where the government intervenes more in the market economy – even if they are not aware that this is happening.
To make things even more interesting, the results were similar for all people. It doesn’t matter if you’re rich or poor, male or female, etc. You are likely happier if the government steps in to regulate the market.
This comes as a big surprise, because while you would expect this to happen for poorer people who generally benefit from government interventions, right-wing politicians argue that an interventionist policy is in the detriment of the middle and high class.
However, the researchers urge for caution in interpreting the results.
“While we find empirically (and believe there are strong theoretical reasons to believe) that social democratic policies do contribute to a world in which there is greater life satisfaction, we offer no judgement on whether an expansive, activist state is “better” or “worse” than a limited one.
Instead, we focused our attention on one part only of this enduring debate about the size and role of government by asking: Does more government enhance human happiness?”
The answer to the last question seems to be ‘yes’.