The 10 Things Economics Can Tell Us About Happiness

More

Money can buy happiness, but up to what point? And does working more make us miserable? And will you be happier if you start your own company? Here's what the research tells us...

Screen Shot 2012-05-31 at 3.56.33 PM.pngLast week, I shared the OECD's brand new rankings of the happiest countries on earth. This week, let's pull back the lens and consider the most important lessons about well-being from the mountainous piles of economic research distilled by the New Economics Foundation's excellent review. All caveats about the messiness of research bias and the usefulness of self-reported happiness surveys apply.

1) Generally speaking, richer countries are happier countries (see above). But since many of these rich countries share other traits -- they're mostly democracies with strong property rights traditions, for example -- some studies suggest that it's our institutions that are making us happy, not just the wealth. More on that in a second.

2) Generally speaking, richer people are happier people. But young people and the elderly appear less influenced by having more money.

3) But money has diminishing returns -- like just about everything else. Satisfaction rises with income until about $75,000 (or perhaps as high as $120,000). After that, researchers have had trouble proving that more money makes that much of a difference. Other factors -- like marriage quality and health -- become more relatively important than money. It might be the case that richer people use their money to move to richer areas, where they no longer feel rich. Non-economists might chalk this up to the "keeping up with the Jones'" principle.

  • 3a) The diminishing-returns principle is true for entire countries, too... The "Easterlin Paradox" suggests that once a developed country passes a threshold average income, more growth doesn't increase average reported happiness.
  • 3b) ... but there might be exceptions -- or the whole theory might be wrong!. Betsey Stevenson and Justin Wolfers, disagreeing with Easterlin in a widely-read paper, have showed that some countries, such as Japan and Italy, have clearly rising levels of well-being alongside rising GDP.

4) Income inequality reduces well-being, and higher public spending increases well-being. These conclusions have been reached many times ... and called into question many times. Most interestingly, "perceived social mobility" might mitigate the effects of income inequality. If people think they can move up the income ladder, they're willing to tolerate a larger equality gap.

5) Unemployment just makes you miserable. Across most surveys, nothing correlates with unhappiness more than unemployment, except perhaps for bad health. This effect is particularly strong among men in Great Britain, Germany, and the U.S. There is an odd silver lining: Being around lots of other unemployed people makes us feel better about not having a job. So high-unemployment regions can possibly "neutralize" the negative effects of unemployment -- but that shouldn't make you feel good about them.

6) Inflation makes you pretty unhappy, too. But its effect is weaker than unemployment. The mixed evidence seems to suggest that a volatile inflation rate decreases well-being, but in countries with generally stable prices, a little inflation has a small effect on happiness. And guess whose happiness inflation ruins the most? Right-wingers, apparently.

7) Working more hours makes you happier ... until it makes you miserable. As workers move from part-time work to full-time work, they're happier. But as they move from full-time work to Jesus-when-will-this-day-finally-end work, the joy of labor subsides. There seems to be an "inverse U-shaped relationship" between hours worked and self-reported well-being, although the precise figures differ across countries. Fascinatingly, one study found that, although working long regular hours correlates negatively with well-being, "working overtime has a positive effect on job satisfaction." Go figure.

8) Commuters are less happy. The studies here are really interesting. Health scientists say that commuting can make you sick and die -- not conducive to happiness. Daniel Kahneman's research on female happiness found that while commuting, women experienced the "lowest ratio of positive to negative emotions during the day." One study pegged the magic number at 22: If your commute is more than 22 minutes, there is an appreciable decline in reported well-being. Yet another study found that for every 10 minutes of additional commuting, community involvement falls by 10 percent. 

9) Self-employed people are happier. When workers think they're good at their job and that their bosses like them, they're more satisfied. So it makes sense that when they are their own boss, they're happier to work. A famous OECD study found that the self-employed "typically report higher levels of overall job satisfaction than the employed." But another study suggests that only rich self-employed people are happier to be self-employed.

10) Debt sucks. The kind of debt matters. Mortgage debt doesn't correlate much with happiness. Credit card debt does -- in a negative way. Either way, high debt correlates strongly with anxiety and depression.

(Via Well-being evidence for policy: A review. For another discussion of happiness economics that is generally more optimistic about income's relationship to happiness, see this Brookings review of Stevenson/Wolfers' research)

>

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Video

What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.

Video

Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.

Video

Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In