What’s better at creating happiness – the government or the market?
Conservatives say market forces should reign in all aspects of political and personal life. They say that only completely unregulated markets can create a flourishing economy.
Liberals hold that markets sometimes produce inequality – even pain.
As political scientists, we have spent years examining how these different approaches to public policy affect the quality of human life. After all, the Declaration of Independence promises us “the pursuit of happiness”. It’s a question at the root of American politics.
In examining the link between human well-being and public policies, we find strong evidence that certain government policies result in greater levels of happiness than others. If you want to promote happiness, you should support government interventions – and reject policies like those of the current Republican Party presidential candidates.
The market approach
Scott Walker provides a good example of a pro-market approach.
As governor of Wisconsin, Walker opposed such intrusions into the market as the minimum wage, public assistance to the poor and Medicaid expansions. He worked hard to shrink government and to curb workers’ rights to organize into labor unions. Conservatives feel these all interfere with free market outcomes.
Walker, like all of the current Republican presidential candidates, believes any government role in the economy is bad. Florida Senator Marco Rubio finds problems in any social safety net that gives people more than they earn in the market. Jeb Bush opposes any government role in providing access to health care because it both regulates the insurance market and removes incentives for people to work hard enough to afford the health care they need or want. Carly Fiorina is like her GOP brothers in opposing almost all regulations, including the minimum wage. All of these Republicans support “right to work” laws – laws that make union membership optional– because they believe weaker unions lead to job growth by reducing wages.
Leveling the field?
In contrast, progressives stress using the government to achieve goals that don’t come readily via the market. They want government to create fairness and to protect the environment even if that may hinder pure free market operation.
Holding that the market is neither always free nor fair, they promote job safety laws and minimum wage laws, and restrict an employer’s ability to discriminate on the basis of race, gender, religion and sexual orientation in pay, service or hiring.
Democrats say we need some regulations on the efficient but pitiless market forces. Left to itself, the market works only to maximize stockholder profits, the thinking goes. They believe that sometimes businesses or wealthy people must bear some hardships to make life better for everyone. In the name of fairness, they argue that government workers must issue marriage licenses to gay couples and businesses cannot discriminate.
Like John Maynard Keynes, Democrats hold that free markets may be beneficial in the long run, but government action is needed if we are to enjoy those benefits before we die.
The pursuit of happiness
The United Nations, preparing its “World Happiness Report”, surveys the happiness of residents in each member nation. The UN asks, among other things, how people rate their lives on a scale from the “best possible” to “worst possible”. They report – and our research backs this up – that the most important factors for happiness are social support, income security and health. Of these, the latter two can be most directly influenced by governmental policy.
Our research shows that citizens are happier when policies are in place to assure them of fair wages, fair treatment at work and a social safety net that provides some security when the market fails.
The chart below shows how the minimum wage affects overall levels of satisfaction with life. Satisfaction increases as the minimum wage increases.
There is strong proof that certain interventions in the market can improve human happiness. People are happier in nations like Switzerland, Denmark, Canada, Australia, Costa Rica or even Mexico – and in American states like California, Massachusetts and Minnesota – where there are reliable laws protecting workers from the worst downsides of market forces.
While there are surely some negative economic consequences of regulation, the net human impact of these policies is fast and positive. It is important to note that this “happiness benefit” applies to everyone in society: the affluent and the poor, men and women, the employed and unemployed, union members and non-members, liberals and conservatives.
It’s equally easy to show the relationship between the share of workers belonging to unions and happiness. Where large segments of the population belong to strong unions, the governmental protections are less important since strong unions typically provide the same benefits (security, living wages and health care).
The evidence is clear: pro-worker “interventions” in the market benefit society. All citizens are happier when they know that the minimum payoff for hard work is sufficient for living.
The real question is whether our public policies should serve the interests of these citizens or those of the market.