Larry Elliott talks about the failure of the European Union economy. We think he gets the problem wrong. Sure, the one single monetary policy for disparate economies, without that central fiscal redistribution, never really was going to work. Some of us have been saying that since first discovering this ‘ere internet thing (the archives of sci.econ still exist somewhere out there). But the actual problem is that the EU tries to Mazzucato new industries. Control, regulate and plan them from the centre. That’s just something that doesn’t work.

But that’s all obvious. This we think is more interesting:

Stagnant living standards mean unhappy voters

Whatever is true about the climate, the environment, precious Gaia and so on. Whatever is true in the minds of degrowth fantasists. Wherever we are in the doughnut economy and however philosophically correct limitarianism is. When it comes to Hom sap, us ‘umans out here, no economic growth makes us unhappy.

This is rather connected to the Easterlin Paradox, that those in richer countries seem - past a certain point - no happier than those in poorer. That Easterlin effect does rather fade away if we use log scales, true. But our contention (a contention is something weaker than a claim, something that’s a useful working assumption that is until more work has been done on it) is that it is continued economic growth that makes people happier.

Two and three percent a year real growth is what makes for happy, shiney, people. We don’t, not particularly, note that each year. But over the decades of a lifetime it becomes entirely obvious that things are getting better. Which makes for those happy, shiney, people - the children will have a better life than the parents.

That is, it’s not the state of having grown that produces human happiness, it’s the observation that growth is happening which does.

As we say that’s a contention. But we do think it’s a useful working assumption - a standard analysis of our own UK politics these days is that folk are more than a bit grumpy given the lack of sustained growth in recent decades, yes?

From which a lesson. Degrowth just isn’t going to work, not in a democracy. Oh, and, obviously, don’t try to Mazzucato those new industries and technologies that produce the happiness enhancing growth. Obviously, don’t do that.

Tim Worstall