Unhappiness as an Engine of Economic Growth

Abstract

The citizens of the US, China and India have experienced a significant decline in happiness, social capital and leisure in the past few decades, as well as an epidemic of social comparisons. This deep and long-standing social crisis is puzzling when we consider the sustained economic growth of these countries. Is there a relationship between social crisis and growth? The defensive growth approach argues that they may feed each other. The erosion of environmental and social assets caused by increased market activity limits their accessibility, inducing consumers and producers to search for substitutes in the marketplace. Defensive growth is a process whereby market goods and services progressively replace declining non-market sources of well-being and compensate for the negative externalities generated by the increased marketization of society. This process is a self-reinforcing loop: the externalities generated by the expansion of market activities induce households and producers to compensate by buying more goods, further expanding market activity. Because the flip side of increasing economic affluence is rising social and environmental poverty, the impact of defensive growth on happiness is disappointing. I conclude that declining social capital has boosted GDP, working hours and the decline in happiness in the US, China and India.