The Record of the 80s and 90s
Evolution
The 1980s and 1990s have brought about an increased stress on getting ahead. The way to motivate people to do this has been done largely through financial incentives. Companies are striving to align pay as closely as possible to output. In other words, to implement performance-related pay. The problem with this lies in that it is extremely difficult to monitor and determine output in a large amount of jobs, especially those involving teammwork. In such a case people must be evaluated based on relative performance compared to their peers. This increases stress placed on one's rank within a company and ultimately society.
Related to this, economists and politicians have assumed that when external motives for performance are increased, other motives stay the same. Studies have shown, however, that this is not the case. Edward Deci experimented on this by giving puzzles to two groups of students. One group was paid for each correct solution and the other was not. When the alloted time was up, the groups were allowed to continue working. The unpaid group continued to work because of their intrinsic interest in the puzzle. The paid group lost internal motivation due to the increased external motivation (being paid) and did not continue working on the puzzles.
Another of example this occured in a real life case in Switzerland in 1993. Two communities had been selected as potential sites for storing radioactive waste. Economist Bruno Frey surveyed those living in the affected areas. The first question they were asked was, "Would you be willing to have the repository here?" In response to this, 51% said "yes". The second question was, "If you were offered a certain amount of compensation (specified), would you be willing to have the repository here?" Only 25% responded with "yes" to this question. This case shows how financial rewards reduced people's willingness to act on the merits of this case. People likely assumed that if they were going to get paid to have the repository here, it must be something that no one else wants to deal with and the government has resorted to paying people in order to entice them toward agreeing to have the repository.
Given these results, Layard points out that the British government has failed in their approach to reform public services in the 1980s and 1990s. The British government has stressed the need to reward individual performance when they should have been providing an adequate general level of pay and stressing the importance of the job and the promotion of professional norms and professional competence.
The Effect of Television
In trying to explain why happiness has not risen and why depression, alcoholism, and crime have, Layard points out that you cannot assume economic growth increases these factors. In earlier periods of economic growth such as from 1850-1914, alcoholism and crime both fell. The factor that is different in the period of growth from 1950 on is the television. The television allows us to see how other people are living and provides a means to compare ourselves relative to others.
The average Briton watches 3.5 hours of television a day, adding up to about 25 hours a week. While in most European countries the norm is slightly lower at 2 hours a day, the average Briton ends up watching more television than doing paid work in their lifetime. These statistics show how profound the effect of television can be on the well-being, and thus happiness, of people.
In an experiment on how television effects happiness, women were shown pictures of female models. The mood of the women was noted before and after they were shown the images. A noticeable decline in their mood was found after viewing the pictures. In watching television it would be nearly impossible to not come across an advertisement depicting a model like those that were shown to women. This has lead researchers to believe that watching television in unlikely to increase the mood of women. The same experiment was done on men, but this time researchers noticed the effect the images of models had on their feelings about their wives. It concluded that after seeing the images of the models, men felt less good about their wives.
Television leads to unhappiness by overwhelming us with images of body shapes, riches, and goods we do not have and possibly cannot have. Those that are most influenced by television tend to be children. They now grow up in an age where they are constantly being reminded of what others have and how they must strive to be like others.
Summarizing Points
- If my income rises I am happier, especially in the short run.
- But if this makes others less happy the effect on me fades in ways I did not foresee.
- So corrective taxation is needed if my work-life balance is to be efficient.
- We ought not to encourage income comparisons and the struggle for rank.
- External incentives can undermine our internal motivation to do good work. So performance-related pay should be used only with care.
- Advertising should be controlled, especially towards children.
- We should redistribute income towards the poor.
Source
Layard, Richard. Lecture 2 Income and Happiness: Rethinking Economic Policy. 27 February 2003.
