Happiness is a Free Labor Market

From Bryan Caplan’s WSJ review of Nick Powdthavee’s The Happiness Equation:

For instance, happiness research makes a powerful case against European-style labor-market regulation. For most economists, the effect on worker well-being is unclear. On the one hand, regulation boosts wages; on the other, it increases the probability that you will have no wages at all. From the standpoint of a happiness researcher, however, this is a no-brainer. A small increase in wages has but a small and ephemeral effect on happiness. A small increase in unemployment, by contrast, has a massive and — unlike most other factors — durable effect on happiness. Supposedly “humane” regulations to boost workers’ incomes have a dire cost in terms of human happiness.

Hi Ho, Hi Ho,

It’s off to work we go.

Comments (6)

Trackback URL | Comments RSS Feed

  1. Cynthia says:

    Very interesting post. Thanks for sharing. Also, love the video.

  2. Virginia says:

    I’m not sure what to think of happiness research. I’ve learned to go on vacation rather than buying toys. I’ve learned about the hedonic treadmill.

    But, in general, I’m still the same person. I suppose that’s what they’re finding via all of this research: no matter what happens to you, in the long run, you’re still the same you.

  3. Devon Herrick says:

    Regulations that protect workers often have the opposite effect. Labor laws become inflexible and serve to mainly protect older workers from competition. Younger workers suffer high unemployment. Yet, younger workers are unwilling to give up the protections hoping to one day benefit from them. A free labor market does more to guarantee jobs and worker productivity, which perpetuate job growth.

    There was an article in the Wall Street Journal by Michael Barone on the Midwest Model. Michigan with its smoke stack industries and strong union presence was considered the model for job growth around 1970. To say the Upper Midwest is in decline is an understatement. Far less regulated states like Texas are engines of job creation. With all the infrastructure, human capital and investment in the Midwest, how has it fallen so far? Barone argues (convincingly) it is their economic model that is flawed. Their economic model is the antithesis to free labor markets.

  4. KG says:

    Very interesting post. However, I think that Caplan is missing an essential component of the argument — how many people benefit from the happiness of higher wages versus how many suffer from unemployment. Even if, for one person, unemployment is a much stronger negative impact than wage increase’s positive impact, that doesn’t mean that overall one person’s job loss would lead to more net harm than the net benefit of many people gaining wage increases. I would like to see some analysis of how the harms and benefits compare.

  5. Carolyn Needham says:

    I’m surprised there wasn’t a mention (and perhaps there is in the book) of the notion of happiness as an activity and the role of government as the guarantor of that activity.

  6. Brian says:

    It’s plain and clear that Europe’s unemployment rate is so high because they tried to please everyone by essentially creating policies that would guarantee employment or at least living benefits. Their policies have failed and as the EU states have gone into debt, there is even less employment and now austerity measures that have included benefit cuts. The loss of benefits/the threat of benefit cuts is something that is making a lot of people unhappy in Britain and other nations in Europe.