In the eighteenth century Bentham and others proposed that the object of public policy should be to maximise the sum of happiness in society. So economics evolved as the study of utility or happiness, which was assumed to be in principle measurable and comparable across people. It was also assumed that the marginal utility of income was higher for poor people than for rich people, so that income ought to be redistributed unless the efficiency cost was too high.

All these assumptions were challenged by Lionel Robbins in his famous book on the Nature and Significance of Economic Science published in 1932. Robbins argued correctly that, if you wanted to predict a person's behaviour, you need only assume he has a stable set of preferences. His level of happiness need not be measurable nor need it be compared with other people. Moreover economics was, as Robbins put it, about "the relationship between given ends and scarce means", and how the "ends" or preferences came to be formed was outside its scope.
So this was to be the agenda of positive economics, and it has remained so to this day. But what are we to say about public policy? Robbins himself was not averse to public debate but he did not believe that optimal public policy could be analysed within a formal economic framework. However his followers in the remarkable economics department which he created here were more bold. Hicks and Kaldor proposed as a measure of national welfare something close to the GDP adjusted for leisure and pollution. Though some economists (including some here) have objected to this, the majority of economists work with it quite happily.

In the interest of brevity, (I assume), Layard avoids discussing the fact that the industrial revolution and budding consumer culture was a steamy stew from which Hicks and Kaldor, and many others with less taste for science and more for favor, could and did pluck tasty bits to assemble into a palatable meal for the wealthy patrons of "Homo Economicus"-

But in fact the GDP is a hopeless measure of welfare.

For since the War that measure has shot up by leaps and bounds, while the happiness of the population has stagnated. To understand how the economy actually affects our well-being, we have to use psychology as well as economics. Fortunately psychology is now moving rapidly in the right direction and I hope economics will follow.
Interestingly, psychology like economics went through its behaviourist phase, but a little earlier. In the nineteenth century psychologists were allowed to talk about feelings. But then along came Pavlov, followed by Skinner, who argued that we can never know other people's feelings and that all we can therefore do is to study their behaviour. At that time behaviour was largely attributed to conditioning. You may know the story of how Skinner's students decided to test his theory. When he was lecturing, Skinner used to walk up and down the platform, and the students agreed that, whenever he went to the left part of the platform, they would look down and frown, and when he went to the right end they would look up and smile. After a short time they had him falling off the right of the platform.
So behaviourism was the intellectual climate of the 1930s and it is not surprising that economics absorbed that credo. But in the last 20 years psychologists have returned in strength to the study of feelings - measuring them, comparing them across people, and explaining them.  And many anthropologists have also concluded that there are important universals in human nature, without which it would be impossible for us to understand each other.
So people concerned with policy can now revert to the task of maximising the sum of human well-being, based on a steadily improving social science. In these lectures I want to develop a picture of this project and some initial conclusions.
What I shall do is this.

In the first lecture I shall discuss the nature and measurement of
happiness and provide compelling evidence that, despite economic growth, happiness in the West has not grown in the last 50 years.

In the second lecture I shall ask why happiness has not increased, despite huge increases in living standards, and draw some startling conclusions about the efficient level of taxation.

And in the third lecture I shall discuss what other policies really would produce a better quality of life.

I shall end with a rousing defence of the utilitarian philosophy, which motivates this whole endeavour.

lecture one, in which "happiness" is freeze-dried, dissected, and hopefully illuminated;

lecture two, wherein controversial topics-yea verily, heretical- are tenderly brought fourth

lecture three, containing the germs of a policy rationale that at least includes "quality of life".

These lectures are a short read- Layard has the gift of saying a lot in few words- and I will not be able to improve them in that respect. If I dribble out bits to be chewed on, out of context, the whole thing becomes pointless, --so I won't.
I will, however, offer these immortal words, written by a man who might have changed the world:

Creek Prophecy

Only after the last tree has been cut down
Only after the last river has been poisoned
Only after the last fish has been caught
Only then will you find money cannot be eaten

Speech by Robert Kennedy, 18 March 1968, University of Kansas.
"We will never find a purpose for our nation nor for our personal satisfaction in the mere search for economic well-being, in endlessly amassing terrestrial goods.
We cannot measure the national spirit on the basis of the Dow-Jones, nor can we measure the achievements of our country on the basis of the gross domestic product (GDP)
Our gross national product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage.
It counts special locks for our doors and the jails for those who break them. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials.
It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.
It measures everything, in short, except that which makes life worthwhile.

Posted by Beppe Grillo at 10:31 PM in Economics

It's all about---this. If ET has a purpose, it's to illuminate this relationship,--to deconstruct, as Jerome does so well, the silly notion that GDP is the heart happiness, that growth has to do with prosperity.