Stop the treadmill!
- The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950 by Avner Offer
Oxford, 454 pp, £30.00, March 2006, ISBN 0 19 820853 7
Suppose you believe that a central aim of public policy in a democratic society should be improving the welfare of its citizens. Even when resources are plentiful, this is a challenging task because of the difficulty of determining what ‘welfare’ consists in. Beyond basic necessities, there is great variation in what people want out of life. This is true with respect to material goods, and also true with respect to what people want from their work, their medical care, their educational opportunities, their relationships with others, their public institutions, the arts and just about everything else. So any specific commitment of public resources is likely to please some people and displease others.
The way to solve this problem, we are often told, is to provide a wide range of opportunities and let people choose for themselves whatever promotes their personal welfare. Since each individual is in the best position to judge his or her welfare, putting decisions into the hands of individuals is a solution to the social welfare problem that can’t be improved on. To improve welfare, you must increase freedom of choice, not because increased choice is necessarily good in itself, but because it increases the chances that each individual will be able to find something that serves his or her interests.
This is the central dogma of neoclassical economics. Economists assume that we know what we want, and that we are rational, so that if we have the opportunity – freedom to choose – we will choose whatever gives us the greatest satisfaction. These assumptions go a long way towards explaining the Reagan/Thatcher revolution, and they contribute to the current enthusiasm of many in the US for the privatisation of pensions and health insurance, for choice in schooling and, more generally, for the libertarian view that the best government is the least government. Whatever else initiatives like these may achieve, each has the virtue of allowing individuals to pursue welfare as they see fit: risky retirement investments or safe ones, open classrooms or highly structured ones etc. On this view, the real virtue of the competitive free market is not so much what it gains in economic efficiency (narrowly defined as output per unit of input) over other economic systems, as what it gains for individuals in opportunities to choose.
The importance of choice also casts light on the emphasis that developed societies place on increasing the material wealth of their citizens. The value of material wealth has more to do with its relation to freedom of choice than with its relation to luxurious standards of living. It is roughly true that the wealthier a person is, the freer they are to live the kind of life they want and to make the choices they want. Wealth liberates: per capita GDP is a decent proxy for the amount of freedom enjoyed by individuals in a society. It is an admittedly imperfect measure: civil rights don’t require wealth, and wealth doesn’t buy freedom of speech or assembly. But even with civil rights, if you have to struggle to exhaustion every day just to meet your basic needs, freedom of speech or assembly becomes the kind of luxury you rarely get to enjoy.
The view that choice is essential to collective welfare seems compelling, on account of the reasonable assumption that if some choice is good then more choice is better. Adding further options can’t make anyone worse off and will surely make some better off. It’s what economists call ‘Pareto efficient’. And increasing wealth is what makes more of these options real for more and more citizens.