Happiness. Can't buy it?

Many surveys taken in rich countries "tend to show that, once a country has lifted itself out of poverty, further rises in income seem not to create a meaningful rise in the proportion of people who count themselves as happy." (The Economist, 13/1/05)

Why? Richard Layard believes he has the answer: one person's pay rise is another person's psychic loss; or in other words, it is relative rather than absolute wealth that matters most to people. So, the fact that those in rich countries have become even richer over the past decades, and live longer, fails to translate into a higher proportion of them feeling happy.

"So ... by spending 90 hours a week in the office, you may be improving your own income, but you are also causing other people to feel less satisfied with theirs. They may be encouraged to work longer themselves just to keep up, taking from the time that gets devoted to family and community."

"It is, [Layard] argues, something similar to environmental pollution, where one person's action (or a company's) makes others worse off. Fortunately, he notes, economists have already figured out how to deal with such externalities: tax them so that the polluter internalises the cost of his actions. And so, near the top of Lord Layard's list for improving human happiness, comes the following recommendation: much higher rates of income tax to tame the rat race."

No, Layard is not joking. He is serious. He is seriously concerned about our happiness.