Money Buys Happiness: Solving the Easterlin Paradox
12 Comments Published by Billy Joe Mills on Thursday, April 24 at 3:36 PM.
A long standing finding in economics is the Easterlin Paradox, which is that there is no correlation between happiness and money above a certain base level. Easterlin found that once humans, no matter their country, reach a certain level of income (I believe it was $15,000), their level of happiness stagnates. New research by Justin Wolfers attempts to hack down the Easterlin Paradox. Wolfers claims that greater wealth does in fact make people happier. This research gets at the old question of whether money can buy happiness. It is interesting to think of happiness as a commodity and as the production and consumption of happiness rising with a country's wealth in the same manner as cars or computers.
Wolfers has done four great posts summarizing his research on the Freakonomics Blog. Actually, the first post on that link is actually one by Arthur Brooks who claims that conservatives are happier than liberals. It is possible that one contribution to this phenomenon is that some American liberals seem to hold guilt about their privileged position in life. Furthermore, religious beliefs and church communities tend to make people happier and conservatives are more likely to be religiously active.
Wolfers has done four great posts summarizing his research on the Freakonomics Blog. Actually, the first post on that link is actually one by Arthur Brooks who claims that conservatives are happier than liberals. It is possible that one contribution to this phenomenon is that some American liberals seem to hold guilt about their privileged position in life. Furthermore, religious beliefs and church communities tend to make people happier and conservatives are more likely to be religiously active.
Labels: Billy Joe Mills, economics
Know what's kind of annoying? Posts that throw up a bunch of random data without any original commentary associated with it.
Well, it's a power law, (no surprise, they're everywhere) so it should be subject to power law rules.
The first thing that can be deduced from it being a power law is that it is impossible to determine the magnitude of increase or decrease of happiness for a given person due to an incremental rise or fall of income. That's textbook system dynamics.
Tom
Can you expand on this? Kind of bare post.
I'm not sure why it annoys or upsets people that I am trying to disseminate interesting academic research. I merely wanted people to be aware of it. I don't quite understand the harsh responses from brian and anonymous.
I didn't comment on the validity of the studies because I don't have time to write lengthy posts during finals weeks, but I didn't want that fact to prevent me from sharing valuable knowledge. I love economic studies and I was simply hoping to spread that enjoyment.
Anything I could say about the studies has already been said by Wolfers in his four posts, which I linked to. He's a lot more interesting and qualified than me.
There are two types of posts, one that leads people to other knowledge and one that creates new knowledge by synthesizing information. I don't know why Brian has a problem with my post, especially given that he has on many occasions made posts of the first genre himself. Both genres are valuable.
Billy Joe,
Relax, it was an interesting post. Perhaps Brian would have liked it more if you posted a random YouTube video, or a picture of your dinner from last night?
Brian,
Here are nine of your posts, which account for about half of your most recent posts, that fit the description that you attributed to me, "Know what's kind of annoying? Posts that throw up a bunch of random data without any original commentary associated with it."
http://www.urbanagora.com/2008/04/great-moments-in-political-journalism.html
http://www.urbanagora.com/2008/04/help-us.html
http://www.urbanagora.com/2008/03/is-it-just-me.html
http://www.urbanagora.com/2008/03/another-argument-that-race-is-over-with.html
http://www.urbanagora.com/2008/03/constant-struggle-to-be-hip.html
http://www.urbanagora.com/2008/03/i-hope-this-isnt-pathetic-and-callow.html
http://www.urbanagora.com/2008/03/trust-really-smart-guys-for-all-your.html
http://www.urbanagora.com/2008/03/thai-stir-fry-blogging.html
http://www.urbanagora.com/2008/03/keeping-things-in-perspective.html
Sincerely,
BJM
I just like to point out that Liberals were happiest in 99/00, Clinton years and have fallen precipitously since...
I love the economics of happiness (and all the other loosely related fields). Sappy or cliched as this sounds, it really has changed the way I live and make decisions.
Here is a cool , tangentially related video by a good speaker that I like a lot.
Now, on to your actual post :)
I do not think you intended for the title of your post ("money buys happiness") to imply that the money is the cause of the happiness. Nevertheless, it is still not clear to me that money causes long-term happiness on an individual or national scale, although I do think there probably is at least a weak causal relationship in this direction. It is possible that happiness also, to some extent, causes wealth. And also some things tend to cause both wealth and happiness.
Although this research is inconclusive in my opinion, I was still happy to see evidence against the Easterlin Paradox. I have always felt that both absolute wealth and wealth relative to peers play roles in happiness.
Another possibility is that Easterlin's Paradox held (at least to some extent) at the time of his research, but it no longer applies. Today's world is more globalized. so people today are more likely to compare themselves to people in other countries. Also, perhaps marketers have made people more dependent on wealth for happiness than they were 30 years ago (I don't know; I wasn't alive then).
One other important thing often not mentioned in happiness research is lifespan. Lifespans are longer in wealthier countries. Someone who lives an 80-year life at a happiness level of "8" is going to experience more net happiness than someone who lives a 40-year life at the same happiness level. Not only are the lifespans longer to begin with, but wealthier countries also have the resources and desire to conduct the sort of research that will further lengthen lives.
Billy,
My apologies. I'm a little stressed about exams, and I got testy. I do get irritated when you post raw data because I think you have a way of getting starry-eyed every time you see a chart, graph, or spreadsheet, and I think that's a bit silly. But to suggest that these posts have any less value than some of the ones I have posted was, indeed, hypocrisy.
Todd,
Thanks for the comments, very interesting. I agree that the title of my post was misleading, to be honest I was trying to grab attention. I thought that your most interesting comment was, "Today's world is more globalized. so people today are more likely to compare themselves to people in other countries." I agree entirely with this sentiment. Papers I've written this semester emphasize the lack of acknowledgment some (or all?) happiness studies grant to the way people evaluate their happiness. It seems that people tend to compare themselves, at least pre-globalization, to their neighbors or to some non-existent ideal, rather than to the station of the average human. Happiness seems to be a relative evaluation for humans rather than an objective evaluation. The problem is that many of these studies rely on or presume that humans make an objective evaluation of their level of happiness.
Regarding lifespans...my understanding of these studies is that they ask someone's level of happiness at a given time, rather than aggregating their answers. If they were to aggregate their answers then their net happiness would be higher given longer lifespans, but I don't think that affects these surveys except in that people might get a boost in happiness from the knowledge that they will live to 77 instead of 40.
Brian,
I'm sorry for when I irrationally flip out on you as well. You know full well that I have nothin' but love for my Urbanagora co-founder BJP <3
Yeah, there are all sorts of problems associated with self-reporting happiness. Wording the questions differently causes different results. The meaning of "8 on a 10 point scale" differs from person to person and from culture to culture. People are also unable to directly experience other people's lives, so someone who thinks he's happy might change his mind if he were able to experience a day in the life of a happier person. There are also many reasons people might not be honest in their self-assessments. I could go on about them, but I don't want to write a paper myself :)
Some of the recent studies are measuring brain activity in attempt to measure happiness. Hopefully we'll keep getting better and better and acquiring and interpreting this sort of physiological and psychological data.
In my experience, you are right about the lack of aggregation of happiness over the course of a lifespan. I think there should be more effort to aggregate. In my own life, I make some decisions that probably reduce my happiness level but increase my life expectancy by enough to cause my net happiness to increase. I think most people do the same thing. If we didn't, we'd probably be drug addicts and regularly participate in dangerous but exhilarating activities. People who live that way probably enjoy phenomenal happiness levels but only for a short time period.