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The Challenge of Affluence

In his recently published book, Deep Economy, Bill McKibben argues that increasing material wealth no longer brings happiness, but in fact is counter-productive. (McKibben - Happiness and the deep economy in EB).

From a Oxford scholar Avner Offer'comes scientific evidence for McKibben's thesis. His hefty tome, The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950, is probably the most definitive work thus far on the issue. The articles below give some hints to his thinking.


Click on the headline (link) for the full text.

Many more articles are available through the Energy Bulletin homepage



Book review

Daniel Ben-Ami, Culture Wars
The Challenge of Affluence is one of the most profoundly miserable books anyone is ever likely to read. It is also probably one of most important challenges to the conventional wisdom on economic growth.

Avner Offer, Chichele Professor of Economic History at Oxford University, does not quite argue that growth is bad but he comes close. Up to a certain point he acknowledges that people can benefit from rising affluence. But beyond that point any growth is likely to be counter-productive as one set of individuals simply benefits at the expense of another. To quote Offer: ‘Economic growth has a strong positive impact on the quality of life in poor countries. That does not constitute an argument for further enriching the rich in the most affluent ones.’

Offer’s argument is complex but it includes two key propositions. First, beyond a given point - exactly where can be debated - the benefits from economic growth diminish. In economic jargon terms this is known as the ‘diminishing marginal utility of consumption’.

In other words if someone is hungry and they eat a cake they are likely to benefit hugely. Perhaps they will still enjoy eating a second or even third cake. But the more cakes they eat the smaller the additional benefit from each cake will be.

After a while eating cake will become counter-productive as consuming too many can lead to obesity. What is true for cake is, according to this view, true for society too. We may have more material things than ever before but, according to opinion poll evidence, they are not making us any happier.

The second key argument is that people’s happiness depends on their relative position in society rather than absolute wealth. Most individuals, it seems, would rather earn £30,000 a year when the average is £20,000 than earn £40,000 a year when the average is £50,000. From such a perspective competition between individuals does not benefit society as one person’s gain is another person’s loss.

Indeed, for Offer and other happiness advocates, the battle for affluence is worse than a zero-sum game. It means that individuals are locked in a competitive struggle which is ultimately dispiriting. This is what they mean when they use terms like ‘hedonic treadmill’ and ‘rat race
(3 July 2006)


Obesity, Unhappiness and Offer’s "The Challenge of Affluence": Theory and Evidence
(PDF)
Andrew J. Oswald and Nattavudh Powdthavee, Economic Journal
Is affluence a good thing? This article examines important ideas raised in a new book by Avner Offer (2006). In Offer’s view, economic growth undermines well-being. The paradox of affluence is that a flow of new rewards impairs people’s capacity to enjoy them.

...Although it is not easy in a few lines to do justice to the breadth and especially the vibrancy of Avner Offer’s writing, these are some of his conclusions:

1. Affluence has changed people’s lives, but economic growth has not done much to make people happier. Life is probably getting worse.

2. The main reason is that choice is fallible. In particular, human beings want their pleasure now rather than tomorrow. They have trouble -- far more trouble than economics textbooks teach us -- in practising prudence. Myopia prevails to an unhappy extent. The world is full of hyperbolic discounting.

3. Human impatience causes bigger problems in wealthier societies. The outcome is disorders of self-control on a larger and larger scale - over-eating, family breakdown, addictive behaviours.

4. Dangerously, economic growth leads to a faster flow of novelty. This is disorienting. It corrodes the informal norms, commitment devices and institutions that safely and gradually come into being when change is sufficiently slow.

5. The huge amount of advertising in modern society has reduced trust and made genuine sincerity difficult.

6. Obesity, divorce and excessive TV-watching demonstrate how affluence can reduce happiness.
(March 2007)


Workaholic consumerism is now a treadmill and a curse

Oliver James, The Guardian
As the waves of avarice, incompetence and lust wash over the beached hulk of the SS Blatcher, its errors of navigation are coming into sharp relief. The death of JK Galbraith, author of The Affluent Society, has removed the sharpest cartographer of a quarter century of misguided navigation. Luckily for us, a new pilot has immediately appeared.

Avner Offer is professor of economic history at Oxford University. His book The Challenge of Affluence diligently and readably exposes the extent to which the past 25 years have forced people in the English-speaking world to believe that there is no alternative to dual-income workaholic consumerism, the "hedonic treadmill".

After a century of declining hours at work, the trend reversed in the US and Britain from the 1970s onwards. Consumerism drove longer working hours, for, Offer writes, "in the affluent society, to be without them [consumer goods] was to be poor". It was "essential" to possess a telephone, washing machine and car, but increasingly the range of goods that were indispensable widened. Although their prices dropped, they were soon replaced with "better" models, initially expensive at the very stage when it was socially imperative. Most of all, in response to longer hours and rising incomes, the cost of housing shot up to swallow much of the rising wage.

Oliver James is the author of They F*** You Up. His new book, Affluenza - How to be successful and stay sane, is published later this year.
(May 2, 2006)


In search of the good life

Richard Reeves, New Statesman
...[Avner Offner] correctly identifies short-termism as the principal enemy of sustainable well-being. Hyper-choice and rising material resources make commitment, self-control and moderation harder. Offer uses the rise in obesity as an example of the triumph of short-term gratification over long-term physical and mental well-being. Food also demonstrates how it is easier for the middle class to exert the necessary self-control, because their education, upbringing and status have better equipped them with "commitment strategies" that reinforce self-denial for the sake of self-development. Technology, in particular the ubiquity of the internet, has further reduced the distance and cost of pleasures: "knowledge of how to speed the availability of reward has outdistanced knowledge about how to delay it".

Personal relations, especially in the family, provide some of the richest ground for developing self-control. But educational institutions also have a part to play. Indeed, Offer suggests that one of the roles of the public sector generally is to provide institutional shelters within which commitment devices and strategies can be developed. At the same time, the evidence of our self-destructive short-termism provides the empirical grounds - if not the philosophical or political ones - for paternalist polices such as forced saving for retirement, bans or taxation of certain foods or adverts, and support for stay-at-home parents.

State institutions and regulations can and should act as stabilisers for the market, which is "a source of novelty, individual choice and compelling reward". The practical implementation of Offer's analysis is difficult, to say the least. He is surely right to suggest that "moderation" needs to be given more weight than "choice". But there aren't many votes in it - and no money. Offer planned a fourth section of his book, dealing with policy-relevant problems of social choice such as crime and punishment, housing, public goods and the role of government: sadly he ran out of steam. But Offer is the writer in this field who is most clearly on to something. So at the risk of impatience, let us hope it is less than a decade before we hear from him again.
(22 May 2006)


Trying times on Easy Street

Martin Vander Weyer, The Spectator
The multibillionaire Warren Buffett, a folk hero of the age of affluence, once reminded disciples of his hugely successful investment techniques that 'money can't change how many people love you'. Avner Offer's potent analysis of 50 years of socioeconomic data makes a similar point in less folksy style: 'Affluence breeds impatience, and impatience undermines wellbeing.' As Oxford's Chichele Professor of Economic History and a fellow of All Souls, Offer is scrupulous about defining terms.

'Affluence, ' he says, is 'a relentless flow of new and cheaper opportunities'; 'impatience' refers to the tendency of affluent societies and individuals to exercise this dazzling freedom of choice in 'myopic' ways that satisfy short-term desires rather than 'prudent', long-term needs. Half a century of rising prosperity in Britain and America has brought better nutrition, housing, education, health and leisure, less harsh working conditions and greater freedom for women; yet it has also brought increases in family breakdown, addiction, mental disorder, obesity, insecurity, violence and crime. It has caused communities to unravel and interpersonal trust to decline. It may even have damaged the capacity of human beings for enduring love.
(1 Apr 2006)


The Challenge of Affluence
(Audio)
Thinking Allowed, BBC
...The market promises us more choices, but is that guaranteed to increase our sense of wellbeing? And how confident can we be of making the decisions which are in our best interests.

Laurie Taylor investigates evidence that greater affluence doesn't necessarily result in greater happiness. He is joined by Professor Avner Offer author of The Challenges of Affluence, a comparative study of consumption and well being in the United States and Britain from 1950.
(02 August 2006)
The segment with Avner Offer begins at about 16:30 into the audio.


More money, more problems
An economic historian argues that affluence does not a happy society make

Christopher Shea, Boston Globe
...Oxford economic historian Avner Offer, in his new book ‘‘The Challenge of Affluence’’ (Oxford), makes the latest attempt to shift the discussion of national well-being away from talk of GDP per capita. ‘‘Economic growth is just a statistical artifact,’’ he says in an interview; to focus solely on growth is to miss much of what’s important in life. But while he draws on the studies mentioned above, he goes a step further. The richest societies, he says, particularly America and Britain, have reached a point at which their wealth and growth are actually harming citizens’ health and quality of life.

In making his case, Offer leaps into a debate among economists over to what degree consumers can be trusted to make decisions in their long-term best interests. One influential camp says that a consumer’s actions by definition express her desires and that to second-guess those decisions is to second-guess freedom itself. Offer, though, sides with those who say consumers are systematically shortsighted: Given temptation, they will substitute short-term pleasure for long-term welfare. And affluent societies provide a lot more temptation.

...Of course, Offer isn’t the first to make this diagnosis. The book’s title even echoes that of the late John Kenneth Galbraith’s ‘‘The Affluent Society’’ (1958), which argued that robust public-sector efforts are required to check the more hedonistic private sector. Yet the comprehensiveness of Offer’s case studies—he’s much more of a social scientist than Galbraith, if less of a writer—has earned it respectful reviews even in pro-market magazines like The Economist.
(October 15, 2006)


From saving to food, we make terrible choices

Will Hutton, The Observer
...An intriguing book by Avner Offer, one of Britain's most subtle thinkers about how we live now, champions an alternative to the view of choice, as expressed in the Economist piece. In The Challenge of Affluence, Offer argues that economists (by inference, the magazine) are wrong in the way they think about choice.

The Oxford economic historian marshals an extraordinary array of evidence to demonstrate that the instinct of human beings is to want instant gratification: whether from sex, food, gambling or spending rather than saving, the human animal consistently underestimates the future costs of what he or she is doing in the here and now.

This is hardly news, except to economists who believe human beings rationally calibrate the costs and benefits of any action over time.

The question for all societies, argues Offer, is how to solve this individual tendency to self-destruct, and the answer has generally been to create incentives for self-control. Some are social, such as the stigma that used to be associated with deserting your family; some are regulatory, like controls on gambling. One way or another, society tries to limit bad individual choices.

What makes Offer's thesis original is that he argues that affluence makes self-control even harder and the capacity for individual self-destruction even greater.
(May 14, 2006)


Book review

John F. Helliwell, Economic History (EH)
...By shrewdly combining reviews of the scientific well-being literature with detailed analysis of particular industries (especially autos, advertising, and consumer appliances) and aspects of personal behavior (driving, obesity, mating and family commitment), Offer shows how much more of human behavior becomes explicable, and open to fresh policy perspectives, when the well-springs of human behavior and the determinants of individual decisions are treated as objects of research rather than dismissed by assumption.

...Offer's review of how people actually make decisions -- often myopically, and paying much heed to family, friends, neighbors and the media (sometimes through genuine altruism and regard for others, but sometimes with an envious peek at what the Joneses are driving these days), provides just the right background for his very detailed histories of eating habits, household appliances, and the origin of fins and the Edsel in the 1950s U.S. auto industry.

By combining psychological evidence with historical case studies and statistical analysis from several sectors and decades, Offer effectively explains what is often called the "Easterlin Paradox," that average measures of life satisfaction in Britain and the United States have remained flat over the past half century while average real per capita GDP has soared. From Offer's review, there are several elements to the answer.

It is partly distribution, with much of the income gains accruing at the top end, where they are often dissipated in the negative-sum game of status pursuit, partly the increased commercial exploitation of consumer myopia (credit card approvals in every day's mail), partly an overload of the wrong sorts of information about how life is and should be lived (TV being a principal culprit here) and partly a decline in the extent to which individuals are connected and committed to each other, as friends, spouses, parents, children, schoolmates, workmates, neighbors and society writ large.

All of these trends have been noted and documented before. The contribution of Offer's book, and the literature he surveys, is to show how these various developments have played out, to estimate their consequences for well-being, and to relate these well-being effects to those that might plausibly be expected to flow from higher incomes. This is a refreshingly far cry from the more usual economic histories of advanced economies, driven mainly by the measurement and analysis of the determinants of factor accumulation, output and productivity.

John F. Helliwell, Department of Economics, University of British Columbia.
(Jan 2007)


Author's home page

Avner Offer, Oxford University
I have just published The Challenge of Affluence: Self-control and Well-being in the United States and Britain since 1950 (Oxford University Press, 2006). This is a comparative study of consumption and well-being in the United States and Britain, which applies a dynamic framework of myopic choice to explain and evaluate similarities, differences, time-lags and convergence in the experience of affluence in the two countries.

...The core argument is that affluence greatly extends the potential range of human satisfaction, but that abundance also stimulates myopic biases as the capacity for choice is overwhelmed by a flow of new rewards. Choice is fallible, and is therefore not a reliable measure of welfare or well-being.

Pre-existing innate myopic biases are exacerbated by commercial competitive pressures, leading to a variety of social and individual disorders, such as substance addiction, obesity, rising crime, family breakdown, mental dysfunction, occupational stress, urban congestion, social security crises and fiscal constraint.

This is one of the reasons why the flow of material abundance since the 1950s has not been accompanied by a comparable surge in subjective well-being. This perspective also provides an insight into industrial organisation.
(no date)
Avner Offer - Wikipedia


The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950 (Hardcover)

Avner Offer, Amazon
List Price: $45.00
Hardcover: 472 pages
Publisher: Oxford University Press, USA
(2006)
Excerpts from the book.

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