Who’s Happy Now?

Across the world, the economy is centre stage for citizens everywhere – only India, China and Brazil among the major countries are optimistic about their situation.  In Europe gloom prevails about the current situation, although there is now some optimism that we are at the bottom of the recession among the public.  This may be misplaced, given that unemployment tends to peak three years after the start of recession – and in many economies we are still some way from that point. Most businesses are feeling the pinch, and the public are reining back spending and saving for the worst.

Yet looking beyond widespread anxiety about our economic prospects, we should perhaps take this opportunity to look at the bigger picture.  Most developed countries remain much more affluent and awash with technology that could have only have been dreamt of just a few years ago – even in countries that are under a cloud of economic gloom, real wealth remains much higher than in the past.  When we ask people what would do most to increase their well being, they most commonly say much more money – which at first glance seems foolish.  As long ago as the 1970s Easterman pointed out the paradox between the fact that although wealthier people are happier than poorer ones, as countries get richer they do not automatically become happier – and as the World Values study shows, the world’s richest country is by no means the happiest. The reasons for this paradox are partly due to the importance of relative as well as absolute affluence: offered the choice of 100,000 euros a year as an income where the average income is 200,000 or one of 50,000 a year, where the average is 25,000, most people choose 50,000.

So in the worst recession we have known for decades, evidence shows we should perhaps look at the wisdom of crowds. Although people say more money will make them happier, how people describe their well being varies very little in relation to the state of the economy overall.  Second on most people’s list of things that will make them happier is more time with family and friends.  Our own research shows that while in most developed countries more money will make you happier, it may not do as much as you think.  After about 38,000 euros a year, happiness increases much less with higher incomes than with other factors like the quality of relationships, and health.  Now of course the majority of the population lives on less than 38,000 euros a year – so more money will make many people happier.  But for wealthier people, in work, spending more time with nature, finding religion, spending time with friends and family, trying marriage (people who marry are always happier than those who never take the plunge), staying fit and healthy, and finding an absorbing hobby will make you happier than staying at work later every day in search of that promotion, or extra pay to buy a sports car.  While GDP growth is good for the economy, and can help lift more people to the optimum level of income, many of us also need to make more time to think about what really matters.

Video of Ben Page on happiness

July 13, 2009