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'The 4% Solution': Intangibles Matter

August 8, 2012 3 minute Read by John Prestbo

The way some people see it, we can’t possibly accelerate U.S. economic growth to 4% annually unless we’re happy. Unhappy folks don’t work very hard, and hard work is essential to the cause. Even Fed Chairman Ben Bernanke thinks happiness — or, as he put it in a speech this week, “the enhancement of well-being" — contributes to the sort of economic decision-making necessary for resurgent growth. Efforts have been made for years to construct happiness indexes, but little has come of them because quantifying an emotive state isn’t easy. Neither is defining exactly what happiness is; one person’s joy is the next person’s shrug. Nevertheless, USA Today informs us, some states (Vermont and Maryland) and cities (Seattle and Eau Claire, Wisconsin) have launched happiness-measurement initiatives. And a federally funded panel is examining whether happiness and/or misery ought to figure into gauging prosperity, and if so, how. No matter what comes of all this, it is true that things we can’t see or easily count or accurately assess play a large role in making the United States wealthy. Nick Schulz writes in “The 4% Solution” that “it’s America’s intangible sources of wealth that have enabled it to become the richest nation of all time.” What does he mean? His list of intangibles include “a nation’s laws and rules; social norms and culture; entrepreneurship; attitudes about the future and about change; willingness to take risk; the ability to start new businesses easily; the receptivity of the market to new goods and services; and the overall qualify of formal and informal institutions.” The issue is whether these intangibles send positive or negative vibes through the economy. Entrepreneurs are everywhere, Schulz writes, but do they set up shop in the legitimate economy or in the black market? Laws and regulations, political corruption, taxation policy, and other no-see-ums determine the answer. Happiness may be so personal that it can’t be measured at a societal level. But if we recommit to clearing the way for the pursuit of happiness, we will be doing a lot to reinvigorate both our economy and our well-being.


Author

John Prestbo
John Prestbo

2012 Economic Growth Fellow

John Prestbo is retired as editor and executive director of Dow Jones Indexes. Previously he was markets editor at The Wall Street Journal. He has co-authored or edited several books over the past 30 years. The most recent is “The Market’s Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average,” published in 1999 by Dow Jones Indexes. His column, Indexed Investor, appears on the highly regarded “MarketWatch” business and finance website. He received his bachelor's and master's degrees from Northwestern University.

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