The Economics Of Happiness
Since happy people are more creative and enterprising, more happiness
would lead to higher per capita income? Only for a limited time, if at
all.
By Paromita Shastri
Outlook India | December 24, 2004
http://www.outlookindia.com/full.asp?fodname= 041224&fname==col+Paromita
&sid==1
Money can't buy you love, but it does go a long way towards setting the
stage for it. Money can't buy happiness either, even if you shop at
Cartier's, but ask anybody what will make them happier and he or she
will probably come up with a list of a house, a car, a better job,
enough money to raise a family, etc. Demands may vary from rich to poor,
people to nations, even men to women, but the rich are always found to
be a little happier than the poor.
Not surprisingly therefore economists confirm that happiness has strong
and direct links with income. What is not so obvious is the
unsustainability of this link. When people do get all that they'd wished
for, they're still not happy. Over time, the link between happiness and
satisfaction of material aspirations gets tenuous. Rich nations are not
necessarily happier -- Americans, with all the clock-stopping material
comforts of the world, are always lamenting the gun culture, growth of
single-parent families, teen violence, rising abortions and drug use,
and so on. The proportion of Americans saying they feel happy with life
has stayed almost flat since 1950 even as incomes have tripled. One
study a few years ago even found Bangladesh, now ranked 138th in human
development, the happiest nation! In India, Goa, simply by virtue of its
"sosegado" approach towards life, could win the vote!
Can economists predict or speak with any degree of seriousness about
personal/national moods and mood-swings? In the 1930s, University of
Pennsylvania economist George Taylor tried to estimate the intensity of
economy activity from, believe it or not, skirt hemlines. Hemlines
climbed in good times, because women could afford to show off expensive
silk stockings. In hard times, when women had little to cheer about or
focus on fashion, they dipped down and down to ankle length. Skirts were
indeed short in the roaring twenties, and long in the Great Depression.
Of course, the fashion industry argued that hemlines had started to
descend much before 1929 but the fable caught on. The depression-hemline
theory was probably the first attempt to connect economics with nebulous
concepts like well-being and depression. That has now given way to
retail therapy, where the bored and depressed eat and mall-hop till they
drop.
In the last thirty years, the question "does more money mean more
happiness" has spoilt the happiness of economists, many of them
integrating psychological factors into economic research to arrive at a
plausible answer. Notable among them are Richard Easterlin, Robert
Frank, Richard Layard and 2002 economics Nobel winner Daniel Kahnemann.
The most important of their findings is that happiness is a relative
experience. People are looking over their shoulders all the time, so my
little house seems perfectly comfortable till a bigger one springs up
beside. And this so-easy-to-flag-off discontent is what puts a permanent
spanner in that sense of supreme well-being. Also, economic policy is
never Pareto-optimal--social action always entails some group to be
worse-off than before.
Still, it seems, well-being can be measured. Happy people laugh more and
women, young and old, healthy, the married, self-employed, retired,
well-educated, and homebodies are happier than their opposites. The
three economic factors vital to happiness, across nations, are: income,
employment and inflation.
Does that mean that since happy people are more creative and
enterprising, more happiness would lead to higher per capita income?
Only for a limited time, if at all. Neither is the opposite true: extra
income does not raise happiness ad infinitum. That's because human
beings adjust, and find new levels of happiness (or unhappiness). Even
lottery winners are found to have stabilised their happiness within a
year. Perception changes too: a mobile phone is more of a necesity now
than five years ago.
Radicals like Easterlin say while education helps, "The knowledge that
economic growth is generating, ever-rising subjective material does not
make it possible to put a stop to the process". In other words, it is
far easier to visualise a needs-free, higher-orders-pursuing society
than attain it.
Are we then destined to remain stuck on a "hedonic treadmill"? Some
economists like Layard seek a throwback to good old sentiments, usually
the stuff of moral textbooks. Neighbourly love, dogooding, collective
action -- working for the common good, in short, can make you happier.
Even more jobs, less commuting time and extra leisure would help. Was
the Left always right?
Such issues then need to be incorporated into public policy. Kahnemann
says it is possible to estimate gross national happiness if people are
asked to keep a happiness diary and jot down their happiest experiences!
The experiment threw up interesting results though: while mothers found
children to be the source of greatest happiness, child-rearing was found
to be one of the most hated work!
If Kahnemann has his way, soon GDP will give way to a Gross National
Happiness Level.
In India, instead of measuring inflation every week, we might calculate the GNH
Index. We could even add to it a monthly gross satisfaction with
our ministers. An economist-friend is willing to stick his neck out if
even his overheads are covered. Sounds weird? Well, if you suggested in
the 1940s that GDP and inflation would be cocktail party topics just 40
years on, people could have thought you Galileo Galilei!
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