Just finished reading Avner Offer's book The Challenge of Affluence and it offers some powerful insights into the paradox of markets and neoclassical economics. Markets are booming, people are wealthier than ever before but they are not happier.

Offer, an economic historian from Oxford, goes one step further: he argues that the pursuit of growth, choice and wealth is what's making people unhappy. And that has enormous implications for business, governments and public policy.

He sums up the argument in his first sentence: "Affluence breeds impatience, and impatience undermines well-being."

First, there is the problem of choice which goes to the heart of the economics. Economists assume that we are rational and that if we have the freedom to choose, we will choose whatever makes us happy. More choice therefore equals more happiness.

Not so, says Offer. Choice is fallible because when there are too many choices, we don't know what the best one is and even if we did choose well, we end up thinking about all those attractive options that we didn't select. It's a principle that holds true for a range of things, from education to mortgages, from marriages to pensions. The more affluent we are, the more choice we have, the bigger the problem.

Secondly, affluence exposes our lack of self-control. It feeds our tendency to indulge in short-term gains at the expense of long-term interests.

"For an individual, from the point of view of the present, an asset delivered tomorrow is worth less than its value today...people indulge in hedonic gratification even at a large cost in the future."

There are many reasons for this: delivery is uncertain and death might intervene; diminishing marginal utility: as the subject becomes wealthier, he or she may value the reward less; what's delivered may not be the same as what's calculated because of factors like inflation and the proliferation of options. The affluence and market drive this paralysis and loss of self-control. Affluence, Offer says, is characterized by the flow of new and inexpensive rewards. "If these rewards arrive faster than the disciplines than the disciplines of prudence can form, then self-control will decline with affluence...New rewards are compelling while their costs are not yet known. Economic competition is driven by novelty and innovation, which stimulate myopic rather than informed choices." The constant flow of novelty, he says, produces a "bias towards short-term rewards, towards individualism, hedonism, narcissism and disorientation.

The interesting part about this book is that Offer considers these issues through an economist's perspective. For example, he looks at the obesity epidemic, a result of easy rich fast food availability, more travel by car, the breakdown of family times, irregular eating patterns and more eating out.

Other signs he examines of affluence driving discontent include consumption shifting from time-saving devices, like washing machines, to time-using ones like iPods and DVDs. The problem here he says is that because of our psychology, we adapt and as a result, the new acquisitions make us happy, but for less time than we expect. We then move on to the next piece of technology. The more time we spend on this hedonic treadmill, the less time we spend with family, friends and community.

He also examines love and marriage (and the fact that these days for half the couples getting married, the disaster or deliverance of divorce is down the road but at the same time, the weddings themselves are getting more lavish). Other areas up for examination through his economist's prism include family, mental health and inequality. And in a world where wealth is the measure of success, what drives people is making sure they have at least as much wealth, or better still more wealth, than their neighbors. After all, the rising tide that lifts all boats does not change your relative position.

What's needed, Offer says, is moderation. "In the nineteenth century, the rich and powerful in Britain embraced an ideal of self-restraint, the gentlemanly ideal. Some return to greater civility by economic and political elites would enhance everybody's well-being."

Global warming might change that!