In a society and during times, when money is said to be a determinant for almost everything, it is not surprising to see researchers striving hard to link it with happiness. The most recent one points out that money does buy happiness, or something close to it, but the effect diminishes above incomes of $75,000 a year. Now that’s a lot of money needed to purchase happiness, you will concur. That would be more than Rs 32 lakh a year in India.
The research by Princeton University’s Daniel Kahneman, a 2002 Nobel economics laureate, and colleague Angus Deaton, concluded that up to a point, people’s “life evaluation” and emotional well-being increased with higher incomes. “We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being,” the two researchers wrote in the Proceedings of the National Academy of Sciences.
There are, they tell us, two aspects of well being: emotional well-being and life evaluation. Emotional well-being would be equal to the quality of a person’s everyday experience such as joy, fascination, anxiety, sadness, anger, and affection. Life evaluation, on the other hand, is a person’s thoughts about his or her life (on a longer time scale). These measure different things; they are not just measures of the same thing.
To measure each, the Gallup Organisation and the Healthways Corporation surveyed a large number of people in the Gallup-Healthways Well-Being Index (GHWBI) asking them to report on both emotional well-being and life evaluation. The researches analysed the responses of the 450,000 individuals who responded in 2008 and 2009.
Among the questions asked for this survey were:
- Income (with the top category being $120,000 and above).
- Emotional well-being: Asks people about how they felt the day before. Authors collapsed responses into 3 categories: a) positive affect (average of happiness, enjoyment, and frequent smiling and laughter; b) blue affect (average of worry and sadness); and c) stress.
- Life evaluation: Cantril Ladder Measure (officially Cantril’s Self-Anchoring Scale) which asks people to imagine a set of rungs on a ladder numbered 0-10 from bottom to top; top is the best possible life for the individual and bottom is the worst; person is asked “on which step of the ladder do you feel you stand at this time?”
The researchers concluded that people’s life evaluations rise steadily with income. That is, using a scale—the ladder—that measures someone’s broad view or evaluation of his/her life, evaluation steadily goes up with income. The same percentage increase in income has the same effect on evaluation for everyone, rich or poor alike even though the absolute dollar amounts differ. A ten percent increase in income moves everyone up the same number of rungs. So someone earning $20,000 a year who experiences a $2,000 increase would move up the rung at the same rate as someone earning $100,000 a year who experiences a $10,000 increase. (This, they say, is in accordance with “Weber’s Law” that contends that the value of money is relative and so a change in income should be measured in percentages rather than absolute terms.)
So if life evaluation “goes straight up” with income, which is what the authors find, it means that doubling income has approximately the same effect on life evaluation, whether people are rich or poor. However, emotional well-being leveled off at $75,000/year. In other words, the quality of the respondents’ everyday emotional experiences did not improve beyond an income of approximately $75,000 a year; above a certain income level, people’s emotional wellbeing is constrained by other factors, such as temperament and life circumstances.
For both life evaluation and emotional well-being—as income decreased from $75,000, people reported decreasing happiness and increasing sadness and stress. The pain of life’s misfortunes, including disease, divorce, and being alone, is exacerbated by poverty. In other words, being divorced, being sick, and other painful experiences have worse effects on a poor person than on a rich.
Life evaluation and emotional well-being are differently affected by life’s circumstances. For example, emotional well-being, although not life evaluation, is better at weekends. College graduates have higher life evaluation, but do not have better emotional well-being.
The economics of happiness
The problems with this study is that it hardly admits that given its very nature, reported happiness is a subjective matter. It is next to impossible to compare one person’s happiness with another’s. This gets more complicated as one traverses across cultures. Happiness economists believe they have solved this comparison problem. Cross-sections of large data samples across nations and time demonstrate consistent patterns in happiness indicecs. That is true only to an extent since though we may belong to different cultures, we remain human beings.
There are two types of people who conduct such studies — economists and psychologists. The first seem more obsessed with linking happiness and money. After all, the central tenet of economics is that money makes people happy. Using deduction, rather than evidence, economists teach their students that utility must increase as income does. Unless the issue of utility is married to money, the factor that ascribes a numerical value to all things economics, many economic theories won’t stand in real life.
In modern history all research pertaining to happiness economics trace their roots to the Easterlin Paradox. It is named after economist Richard Easterlin of the University of Pennsylvania who discussed the factors contributing to happiness in a 1974 paper “Does Economic Growth Improve the Human Lot? Some Empirical Evidence.”
Easterlin summarised his findings, “In all societies, more money for the individual typically means more individual happiness. However, raising the incomes of all does not increase the happiness of all.” The happiness-income relation provides a classic example of the logical fallacy of composition—”what is true for the individual is not true for society as a whole.” Individuals assess their material well-being, not in terms of the absolute amount of goods they have, but relative to a social norm of what goods they ought to have.
Easterlin argued that his analysis of time trends in subjective well-being “undermine[d] the view that a focus on economic growth is in the best interests of society.” This argument has dangerous implications for policymaking. After all, if economic growth does little to improve social welfare, then it should not be a primary goal of government policy. In other words, the implication for government policy is that once basic needs are met, policy should focus not on economic growth or GDP, but rather on increasing life satisfaction. This idea, obviously, strikes at the heart of all capitalist economic theories and policies. Therefore, all subsequent studies by economists try to disprove the Easterlin Paradox that there is no link between a society’s economic development and its average level of happiness.
Going beyond the happiness index
In 2006, Australian researchers found that people in well-off Sydney were among the most miserable in the country, while those in some of the poorest areas were much more satisfied with their lives. They saw that people in rural electorates often had the advantage of additional disposable income since the cost of living, particularly housing, tends to be reduced outside the cities. Of the 150 national electorates surveyed, one of the nation’s poorest, Wide Bay in rural Queensland, was among the happiest.
The findings, collated since 2001 by Deakin University researcher Liz Eckerman, showed that while there were no extremes of well-being, the happiest areas had a lower population, more people aged 55 or over, more women, more married people, and less income inequality. The survey of over 23,000 people assessed a person’s satisfaction with their standard of living, health, relationships, life achievement, safety, community connection, and future security.
A study of college American and Korean students in 2001 concluded that money was at the bottom of a list of would-be psychological needs that bring happiness and fulfillment. In order to be happy, the study subjects most needed to believe they were autonomous and competent, to have self-esteem and to feel a sense of closeness with others. At the bottom of the study’s list of factors that bring happiness and well being were popularity/influence and money/luxury.
Kennon M Sheldon and Linda Houser-Marko of the University of Missouri-Columbia concluded that the most satisfying experiences stemmed from fulfillment of the top four needs of autonomy, competence, relatedness, and self-esteem, and the most unsatisfying experiences corresponded to the lack of those psychological needs. Physical thriving, security, meaning and pleasure ranked midway between the top four needs and bottom two, which were popularity/influence and money/luxury.
No matter how hard researchers, especially those of the economist kind, try, they willy-nilly conclude that after a certain income cap, we don’t get happier. Yet, what you see flourishing is a wellness industry, and countries trying to outdo each other with their own happiness indexes. Bhutan, Australia, China, Thailand and the United Kingdom have developed their own. The last Labour government in Britain even appointed an economist specialising in happiness, David (Danny) Blanchflower, to the Bank of England advisory board. Compare all the methodologies and you will conclude that it is rather easy to manipulate happiness research to serve debatable political goals.
Some participants at a happiness conference in Rome in 2007 suggested that happiness research should not be used as a matter of public policy but rather used to inform individuals. That is what one should do with these happiness findings – smile, and take them at face value.
Tailpiece
In 2006, a woman in Great Britain divulged a very big personal secret. Three years earlier, the woman had won £1.5 million in a lottery, but kept the news away from her entire family, including her husband. The woman called in to a radio programme on the BBC, and revealed that she had stashed the money away in her bank account and barely touched it, because she feared the effect it would have on her relatively happy middle-class life.
A sudden rush of affluence might disrupt the lives of her two young children, she said. And her husband, who had struggled to overcome a minor drug problem 15 years earlier, might want to quit work or start taking lavish holidays, which would “destroy our little family unit we’ve got now.” So, rather than court disaster, the woman decided to tell what she calls a “huge white lie” and go on living as if the money had never arrived, tapping it only for small purchases that wouldn’t raise any suspicion. After three years, almost all of it was still there.
So… no matter what the happiness researchers tell us, the bottomline is that we draw up our own yardsticks. And happiness not the business of economists. Or corporates.
