You write,

Previously you’ve criticized Austrian economics for not paying attention to the life of the mind. I wonder why then you trot out their woefully inadequate account of what happiness is — that “state of inactivity we arrive at when we have achieved our goal” — in this instance.

Happiness is not goal-satisfaction, or the glow that follows, it is introspectively, obviously, a first-person subjective emotional lift that is experienced. Sure, it correlates highly with achieving one’s ends, but it is certainly not just just that!

If it’s the post I’m thinking of, I do not believe that I actually criticized Mises for taking this view. I noted that one could criticize him along these lines, and I implied that many have. (See here, but if you’re thinking of another post, let me know.)

Personally, I agree that happiness seems to encompass many other things besides goal satisfaction. Some people do apparently have higher and lower baseline levels of self-reported happiness, and while there is some evidence to think that many of them are systematically misrepresenting things, there is no evidence suggesting that we are all born equal in terms of our potential happiness, and that it’s simply a matter of how well we reach our goals.

(Examples, from Will Wilkinson’s paper: Latin Americans tend to self-report happiness at levels that are surprisingly high given their demographic circumstances; Asians tend to skew lower. Neither result suggests that intrinsic factors are irrelevant, but both do suggest that people might approach and/or interpret test questions differently. Example, from my own life: Many people seem to conclude that I’m a rather unhappy person. This puzzles me, because they are wrong.)

Meanwhile, if you want to get past pure solipsism, and if you mistrust standardized tests, there’s an entirely obvious method of studying happiness: Look at what people do. So while I agree based on introspection that there is more to happiness than one’s actions would indicate, studying actions alone is still instructive and manages better than most other ways to surmount the barrier between my mind and the minds of others.

Looking at what people do will not quantify happiness, but it will reveal what they are unhappy about. It will also reveal the extent to which they are unhappy.

Yet because of the incommensurate nature of value hierarchies, we cannot measure happiness across different individuals. And because of changing marginal utility, we can’t even standardize units of happiness across different acts by the same individual. The first chocolate chip cookie may make me very happy; the second, happier than before, but less so than the first. The first and second are therefore not substitutes for one another, and it is meaningless to ask “How much does a chocolate chip cookie make me happy?” We must ask how much each individual cookie makes me happy.

Meanwhile, the only way to measure this happiness is by comparison to other choices, and my hierarchy of values will often be quite different from those of others. Someone who hates chocolate may despise the very same cookies and find that getting rid of them is a value instead. Still, there can be no common scale of values between the two of us, because there is never a common standard that is precisely equal among all people.

Revealed preference is therefore an enormously powerful tool for measuring happiness, but it’s also enormously limited. One way of thinking about economics which seems (to my mind at least) consonant with the Austrian approach is to think of economics as the science of happiness, working under the constraints that I have just set forth.

Say it ain’t so, Mises!

Previously you’ve criticized Austrian economics for not paying attention to the life of the mind. I wonder why then you trot out their woefully inadequate account of what happiness is — that “state of inactivity we arrive at when we have achieved our goal” — in this instance.

Happiness is not goal-satisfaction, or the glow that follows, it is introspectively, obviously, a first-person subjective emotional lift that is experienced. Sure, it correlates highly with achieving one’s ends, but it is certainly not just just that!

On your first quibble, I entirely agree. Institutional design and attention to consequence are essential. (They’re just beyond the scope of this post.)

On your second quibble, you may well be right, but it’s difficult for an economist, or anyone else, to measure this happiness byproduct. The Austrian School presumes that people act in a purposeful manner, and that their inaction indicates that, relative to other concerns, they are satisfied regarding the matter in question. This is not enough to do psychology (as they freely admit), but it’s quite enough to do economics.

Two minor quibbles: (1) I’m not so sure that you can specify what justice requires without any reference to actual circumstances, the broad consequences of adopting various rules, etc. (You know, that “institutional” stuff I’m always harping on about.)

(2) I reckon happiness is more like a byproduct of activity than a state of inactivity. *shrug*