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Money Makes Way For Happiness, But Happiness Still Can't Be Bought

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By Samantha Cleaver

Imagine a ladder with 10 rungs. Now, imagine that the lowest rung (0) is the worst possible life that you could have and the highest rung (10) is the best. Where would you fall on that ladder?

If you’re like almost half (49 percent) of Americans, you’re “thriving” on rung seven through 10, according to the most recent Gallup World poll. Another 47 percent of us are “struggling” on rungs five through six, and four percent are “suffering” below rung four.

Looking into the backstory behind the overall estimates of “thriving” vs. “suffering,” we learn that the vast majority of Americans surveyed (84 percent) experienced enjoyment the day before participating. In comparison, only 38 percent experienced stress, 30 percent were worried, and 23 percent felt physical pain. A large percent (67 percent) ate healthy food the day before, 60 percent did something interesting, while only 33 percent worried about money. It’s these factors—not feeling pain, not worrying about money, and having options to do and eat what we enjoy—that are associated with happiness.

As we learn just what makes us happy and how reliable our happiness polling can be, researchers and policy makers are trying to decide just how much our happiness can and should affect policy and vice versa. First, the ultimate question: does money bring happiness?

Money = Happiness
In the 1970s, Richard Easterlin, then an economist at the University of Pennsylvania, argued that, once basic needs are met, more wealth doesn’t mean greater happiness. Recently, the Easterlin Paradox, as it’s termed, has been challenged. Betsey Stevenson, assistant professor of business and public policy, and Justin Wolfers, associate professor of business and public policy at the University of Pennsylvania, argue that money does bring happiness. The Gallup World Poll, Stevenson argues, shows that over 132 countries, happiness per capita and average income are correlated at .82 (a perfect correlation is 1.0). “That tells us that income is actually a much better metric for happiness than we ever thought it was,” says Stevenson. It appears that the wealthier we and our countries are, the happier we are, overall. And, says Will Wilkinson, research fellow with the Cato Institute, double the income per capita in a country and you’ll get a significant increase in happiness.

One exception to this rule: the United States. According to Ed Diener, distinguished professor of psychology at the University of Illinois and Martin Seligman, director of the University of Pennsylvania Positive Psychology Center, in the past five decades, while income has increased and gross domestic product has tripled in the U.S., overall life satisfaction has stayed the same.

The reason? Americans may have gotten used to wealth. Wilkerson points to the habituation effect; as expectations and standards change over time, the bar by which we measure our happiness is constantly raised, canceling out any relative increase in happiness. Or, we could just be experiencing larger trends that have little to do with wealth. “The things that could keep happiness from rising could be an increase in uncertainty that people feel in preparing for retirement, health care, people are more mobile, they’re marrying at later ages, getting settled later, all those things could have a negative impact,” says Stevenson. Or, we could be expressing the negative outcomes that accompany wealth; in the U.S. rates of anxiety and depression have increased 10-fold in the past 50 years, according to Diener and Seligman.

Whatever the cause, the researchers agree on one thing, the link between wealth and happiness isn’t about consumption. As Stevenson points out, it’s not about going out and buying more, but about having freedom from pain and worry, and having more days of enjoyment and more choice about what you do with those days that’s associated with happiness. So, what policies would give us less pain and more fun?

Happiness As Policy
The U.S. already has some of the facets of happiness: a wealthy, liberal democracy. But Diener and Seligman outline aspects of our lives that bring us more happiness, and they’re not really that surprising: fostering community and relationships, and supporting policies that help us manage health and work. Or, given that the more we have the more we want, learning to live with less could adjust our happiness baseline. Gregg Easterbrook, author of The Progress Paradox, suggests that we relearn how to live in cities, make use of public transportation, and live on less (Worldchanging's Alex Steffen wrote previously on this topic here). “If we were ever to reach a point where the economy calmed down and nobody worried about resource exhaustion,” says Easterbrook, “then it would be possible for people to step back and say, 'as long as I have a roof over my head,' and maybe other things are more important.”

Samantha Cleaver studied public administration at the University of Delaware. She currently works as a freelance writer in Chicago, IL. Read more of her work at www.samanthacleaver.com.

Photo credit: flickr/Daniel Y Go, licensed by Creative Commons.

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Comments

I've read in a few other places (unfortunately I don't remember where, at the moment) that "per capita happiness" is not only tied to the overall wealth of a country, but to the way that wealth is distributed. Apparently people are less happy (and less healthy, as well) where there is a greater disparity between the richest and the poorest. This may help to explain why the US hasn't seen the expected rise in "happiness" to go along with wealth.


Posted by: Chris L on 25 Aug 08

To poke fun at a metaphor:
Where would you fall on that ladder?
I would fall on rung 7-10, because I'd have run out of ladder to hang on to!

A little less glibly, maybe the question to be asking is:

Does happiness lead to more money?


Posted by: Tony Fisk on 25 Aug 08

Nice post.


Posted by: Saad Khan on 25 Aug 08

I'll muse that an additional component of happiness is expectation. 'American exceptionalism' goes back to the foundation of the United States and is an attitude that continues to permeate the culture.

One fundamental tenet of that exceptionalism is an entitlement to each successive generation having a 'better' life than the previous. Measured in monetary terms, that would be that each generation expects a greater capacity for wealth than the previous. A considerable liability of five decades of American power is that when you are at the top of the chain, there is only one direction to do -- down.

Expressed in anxiety related to pain and worry, Americans may be at a point where they see the end of 'American exceptionalism'. The resulting anxiety comes from lack of a new dream or myth.

Regarding policies that mitigate 'pain' and raise the 'fun' quotient, we must look at the decisions Americans make as a body. The Iraq War is a good example of American expending significant resources to maintain geopolitical dominance. The opportunity cost of choosing a course of action to perpetuate the old model instead of a new model is extreme and threatens to impoverish the country. If the resources expended in the Iraq War had been diverted to renewable energy of any type, today's result might be quite different.

Looking at the voting patterns in previous elections, the story that emerges is that 1/2 of Americans exist in isolation, still believing in American Exceptionalism whilst the other 1/2 of Americans interface with the world and see the fundamental interconnectedness of themselves and everyone else. Overlaying a voting map with number of international flights in and out of a region produces interesting results.

So I would argue that while income is a good reflection of happiness in the moment, the true metric must take into account perception of future happiness. When we look at policies and considerations to increase happiness and mitigate suffering, those policies must take into account external factors.


Posted by: Nick Russell on 26 Aug 08

It would be interesting to see how much of the correlation between wealth and happiness breaks down once you get past a certain income level (e.g. to look only at the correlation for OECD countries). Generally, the science of hedonics is still at an early stage and there are still a lot of anomalies to explain.

The best-scoring countries on self-reported happiness are consistently small, wealthy European countries with a low gini coefficient and a comprehensive welfare system (Denmark, Austria, Switzerland, Iceland...). However, very poor states like Bhutan also rank high, and some Latin American countries with a high gini, like Costa Rica and Columbia, also do very well.

This suggests that at best there are multiple pathways towards a high level of happiness, and in the worst case, happiness is too erratic to be influenced by government policy.

(In the end, happiness also needs to be balanced with other goals. Happiness economics very quickly falls into a rather simple utilitarianism)


Posted by: nanne on 26 Aug 08

Gosh, am I the only one who understands that George Bush started the war in Iraq as his entry in the best reality TV show sweepstakes? Americans love war shows. Lots of explosions, burning cars, smoke and fire. Lots of dismembered women and children laying around in the streets. Gobs o' blood. And it is so much cheaper to do them for real without all the fussy actors and directors in the way. Every take is good for hours of selling detergent and cars too. It does seem to be getting a little old, and the viewership is dropping off, but man, what a show.


Posted by: Joe Bell on 26 Aug 08

@Joe Bell - most American media avoided showing dead women and children, as well as great gobs of blood (at least, at the start of the war). Dead Iraqis were often turned away from the camera, and more often than not they weren't missing any limbs. Not to mention that dead Americans aren't shown at all.

Recall that it was the visible graphic violence of the Vietnam war that led people to rally against it. If more of the real Iraq war had been shown early on, the approval rating would have dropped much faster.


Posted by: Chris L on 26 Aug 08

I agree the entertainment values of George's Excellent Blood For Oil Adventure may have been compromised. But I think that accounts for the general disinterest in the sequel in Iran. And I don't know that the heaped dead burned bodies was as minimal as you suggest. I am not a consumer of this sort of entertainment so I only caught that day's show when I happend to be in an airport or some public eating place. But I have to say, in that limited time, I saw blood and dead children every time.

I also experienced the Viet Nam Blood Bath, and the part of that show which seemed to get people's attention was the "Greetings from the U.S. government" invitations for an appearance slot booked just for you. That is why people rallied. You notice that George and Dick decided not to go back then, and they left that gimmick out of this one too.


Posted by: Joe Bell on 28 Aug 08



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