Tag Archives: Sweden

The Nanny State: repression of happiness?

It’s a pedagogic dilemma all parents will face: should we be strict to our children and prohibit them to do things that are bad for them? Or should we give them the freedom to learn for themselves that sand is not tasty, that you can fall if you climb a tree and that a drink too many has dire consequences the next day?

At the state level, similar dilemmas arise. Social-democrats traditionally don’t scare away from a dose of paternalism to educate citizens. Libertarians, on the other hand, abhor states that coerce a certain type of behaviour. Which recipe works best to develop a happy society?

Two weeks ago, I addressed the question “does size matter” – when it’s about the size of the state and happiness levels, that is. The evidence indicated that some of the happiest states are smaller countries, and that after a certain level? There is – surprisingly – a positive correlation between higher tax and higher life satisfaction. Does that also mean that a more active government, a Nanny State, could contribute to higher levels of happiness?

Nanny State Index

Republicans in the US and liberals in EU States – such as Dutch PM Rutte – agree on one thing: big government is big enough, and the state shouldn’t interfere too much with individuals’ life. That’s also the thought behind the Nanny State Index. It has been developed by liberal or libertarian think-tanks, and maps the strictness of regulation affecting personal choice in the 28 countries of the EU.

The Index lists four areas: e-cigarettes, tobacco, alcohol, and food. There is quite a difference in the freedom of access to this products across the EU. For instance, in Sweden alcohol is only available in state stores and e-cigarettes are effectively prohibited in Belgium.

Altogether, two of the paternalistic Nordics, Finland and Sweden, top the list. They stay ahead of UK and Ireland. As a result of strict rules on tobacco and so-called ‘sin taxes’ on unhealthy foods and drinks, Hungary completes the top-5. Denmark, which one might expect to be in sync with paternalist Nordics, only ranks 12th. On the lower end of the scale, we find Netherlands, Luxembourg, and Germany. The freest country of all is… the Czech Republic.

Nanny State Index. Source: www.nannystateindex.org

Nanny State Index. Source: www.nannystateindex.org

 

Does repression, or freedom, bring happiness?

Is there any correlation visible between being a nanny and low and high happiness levels? The evidence is difficult to interpret: the three top-1o countries of the World Happiness Report rank at different places in the Nanny State Index. Swedish is on top of the list, the Netherlands at the bottom, and to confuse the picture further, Denmark is mid-way in the table.

The implication might be the following. Policies may work out differently in different settings. It’s probably the same with children: all are different. Some kids will exploit freedom and end up in troubles; other will feel their confidence strengthened and will be good and happy citizens.

The optimal income for happiness

What is the optimal income for happiness? How much happier are people with a large bank account than those who suffer through the last days of each month? Scientists have done a lot of effort to investigate the relation between money and happiness.

The conventional wisdom in happiness economics states that, indeed, happiness levels rise with income, to a certain point. After this point, the impact on happiness of an additional euro, pound are dollar is virtually zero: more money does not mean more happiness. But is it possible to exactly measure the cut-off point? That is, can we measure what the ideal income is, generating the best happiness bang for the buck?

Eugenio Proto of Warwick University and Aldo Rustichini of the University of Minnesota claim to have the answer. Their research attests that life satisfactions reaches its maximum level at an income level of $30,000, or about the level of Equatorial Guinea using World Bank data (though French people aren’t necessarily the happiest ones).

But Proto and Rustichini’s research reveals there is even more: after this point, people even become less happy. They  explain that this effect arises due to changes in what they label the ‘aspiration level’ of people with a below average income in rich countries.

Simply speaking, when incomes rise, the gap between the have-lots and have-less become bigger. When surrounded by wealthier people, people have higher aspirations for their own life, often irrationally> as the gap between reality and dreams increase, life satisfaction diminishes.

Their data set out the income level versus the likeliness of reporting the highest level of happiness. People in a country with an income per head of $5,600 are 12% less likely to report the maximum number than in a country with an income of $15,000. As incomes rise, the effect disappears. And after $30,000, the link even becomes negative.

What does this mean? Of course, you may consider moving to Equatorial Guinea if you live in a richer country but make less than the holy number of $30,000. Jokes aside, there is more  at stake here. Higher incomes aren’t necessarily a sign of progress. They might be caused by longer working hours, more overtime and less time for leisure, all factors that bring down happiness.

But maybe the real effect displayed by the study is the cost of inequality. Earlier studies have shown that it is not only the absolute figure of income that determines your happiness. It is also about your income relative to what you could make. If you make less than your friends, your colleagues, or than your did in a previous job, this might cause total misery. The moral of the story is simple: if countries care about our quality of life, they should seek to control income inequality. Equal countries, like Denmark, Norway and Sweden are all in the top-five of happiest nations. At least, their high government spending seem to be good for something. Money can’t buy you happiness, the adagium goes, but maybe their high taxes do?