Our living standards have gone up, but we're more miserable than ever.

So what is the secret to a happy life? Shahid Naqvi went to Birmingham University's Baggs Memorial Lecture on Happiness to find out...

We're living in the fourth richest nation on Earth. Our quality of life has never been better. Wages are higher. Unemployment lower.

But are we happy?

Apparently not. Surveys show over the last half a century there has been a significant increase in depression. Crime - an important indicator of social dissatisfaction - has risen. Divorce rates are higher, trust in others has fallen, and most people believe behaviour among the young has got worse.

So what's the problem?

An attempt to answer this was made during the Baggs Memorial Lecture on Happiness - a yearly event at The University of Birmingham.

This time it was the turn of leading economist and former Government consultant Lord Richard Layard to have a go at answering the big question.

Lord Layard, a researcher with the London School of E conomics since 1964, believes what we currently lack is a concept of the "good society".

In the void left by religion, he says, Britain has been infected with an unhealthy dose of individualism caught from our American cousins.

"There is a tsunami wave of individualism flowing across the Atlantic which has hit Britain fairly hard but has not yet hit Europe," he said.

"Under individualism, if you ask what is your main object in life it is to make you happy, not what you can contribute to others' happiness.

"But the greatest difference between happy people and unhappy people is whether they see other people as a threat or an enjoyment."

Lord Layard believes the problem with today's society is that institutions are also infected by such individualistic principles, drawn from the philosophies of Darwinism and the 18th century thinker Adam Smith. The former gave us survival of the fittest as a guiding maxim and the latter the idea that if you organise society properly it does not matter that people are self-ishly motivated.

"I think both these are wrong," said Lord Layard. "The idea that life is a struggle for survival is not correct and we shouldn't rely on selfish motivation when we create our institutions."

But because our economy is built like this, we live life in a constant state of fear perpetuated by the establishment, not least the likes of CBI director-general Sir Digby Jones, Lord Layard claims.

"Some of us heard Digby saying not long ago if we don't change our ways we will be eaten for lunch by India and dinner by China," he said.

"This is an extraordinary climate of fear that is being put across."

It is also one that companies encourage, he added.

"There is an idea that we have to keep changing everything all the time. We inflict an excessive amount of reorganisation within work. We are in danger of getting to an almost Maoist league where you have to constantly reorganise, like constant revolution.

"But people don't want change. It is not natural. They enjoy being with the people they know. The function of management is to ensure people get what they enjoy."

Lord Layard dismisses the "performance related pay" culture that originated in the 1970s as "demotivating" and resulting in "zero gain".

"People don't like competing directly with people they work with. They want to cooperate," he said.

He also attacked the "all or nothing" focus on meeting targets.

"Either you hit or not and it is classed as a failure. People are being hit over the head just because they miss a target and it is extremely dysfunctional."

Lord Layard squarely lays the blame for this climate of intimidation on the "managerial classes". He said: "It gives them a hold on the rest of the community through engendering a feeling of fear and necessity to comply.

"I think it is extraordinary that we are living in a period of unprecedented stability and affluence, yet we are always being told that everything is in the balance." So, is there hope for the future?

Lord Layard thinks so. He is inspired by the fact that one local authority - South Tyneside - is adopting the principles of his book: Happiness: Lessons from a New Science.

And he hopes other authorities and, ultimately, the Government will follow the lead.

"What would make me really happy," he told the packed Birmingham audience, "would be if the central issue in the next General Election was the pursuit of happiness." ..SUPL: