December 4, 2022

It’s the Economy: Money Changes Everything

And economists will definitely have a theory about your happiness based on where you live. In collaboration with psychologists, a number of respected economists have spent much of the past decade or so mapping our levels of happiness across borders and daytime hours. Angus Deaton, an economist at Princeton University, is helping shape the movement to incorporate subjective measures of emotions into serious economic analysis. The goal is to use this new data to inform more traditional measures, like G.D.P. or the unemployment rate, and to influence government policy. Or at least that’s the idea.

Happiness quantification sounds a bit wishy-washy, sure, and through a series of carefully administered surveys across the globe, economists and psychologists have certainly confronted a fair number of sticky issues around how to measure, and even define, happiness. Still, some of the data make lots of anecdotal sense. Given that Nevada was ground zero for the housing bust, it’s not surprising that its citizens are less happy than Coloradans. Other findings, though, are more opaque. Why does western Long Island score several points higher on the happiness scale than most of Brooklyn? (Does being richer make you feel better than being cooler?) Why do Filipinos, who live in a relatively poor country, report such positive emotions?

Though still unrefined, happiness quantification has come quite a long way since 1974, when a University of Southern California economist named Richard Easterlin published an important paper that put the field on the map. His conclusion, known as the Easterlin paradox, stated that people do not become happier as they get richer. Around the same time, the Kingdom of Bhutan (population 738,000; average income, around $5,800) also began plans to measure what it called gross national happiness. These ideas might have had an impact, but nobody paid attention. “The general reaction of economists,” Easterlin told me, “was: ‘This is just subjective testimony that nobody puts any credit in.’ ”

Happiness studies became a hot discipline in the early 2000s, and France, Britain and other governments now conduct surveys of their own national levels of emotional well-being. It can be fairly instructive. Deaton, who advised the French government on its report, said, “The French are pretty miserable.” The United Kingdom’s Office of National Statistics reports only a slight happiness dip despite a deep recession. On the other hand, Bhutan’s happiness survey is so complex that I have no idea what the Bhutanese are feeling. Nonetheless, a United Nations committee has called upon the world’s governments to adopt happiness measures. A United States government panel is exploring the issue here.

As more data come in, however, many economists are becoming convinced of one significant change: the original Easterlin paradox doesn’t quite hold up. Broadly speaking, the data now indicate that as people get richer, they report getting happier too. Though it’s not quite that simple. Justin Wolfers, an economist at the University of Michigan who helps advise the U.S. government on happiness statistics, told me that poor people in poor countries are not unhappy simply because they don’t have wads of cash. They are more likely to have fewer choices, more children who die in childbirth and other grave problems. And while wealthier nations are generally happier, there is no evidence, Wolfers says, that an artist would be happier if she became a hedge-fund trader.

Article source:

Economic View: Why Worry? It’s Good for You

In recent decades, behavioral economics has been the economics profession’s runaway growth area. Scholars in this field work largely at the intersection of economics and psychology, and much of their attention has focused on systematic biases in people’s judgments and decisions.

They point out, for example, that people are particularly inept at predicting how changes in their life circumstances will affect their happiness. Even when the changes are huge — positive or negative — most people adapt much more quickly and completely than they expected.

Such prediction errors, behavioral economists argue, often lead to faulty decisions. A celebrated example describes an assistant professor at a distinguished university who agonizes for years about whether he will be promoted. Ultimately, his department turns him down. As anticipated, he’s abjectly miserable — but only for a few months. The next year, he’s settled in a new position at a less selective university, and by all available measures is as happy as he’s ever been.

The ostensible lesson is that if this professor had been acquainted with the relevant evidence, he’d have known that it didn’t make sense to fret about his promotion in the first place —  that he would have been happier if he hadn’t. But that’s almost surely the wrong lesson, because failing to fret probably would have made him even less likely to get the promotion. And promotions often matter in ways that have little impact on day-to-day levels of happiness.

Paradoxically, our prediction errors often lead us to choices that are wisest in hindsight. In such cases, evolutionary biology often provides a clearer guide than cognitive psychology for thinking about why people behave as they do.

According to Charles Darwin, the motivational structures within the human brain were forged by natural selection over millions of years. In his framework, the brain has evolved not to make us happy, but to motivate actions that help push our DNA into the next round. Much of the time, in fact, the brain accomplishes that by making us unhappy. Anxiety, hunger, fatigue, loneliness, thirst, anger and fear spur action to meet the competitive challenges we face.

As the late economist Tibor Scitovsky said in “The Joyless Economy,” pleasure is an inherently fleeting emotion, one we experience while escaping from emotionally aversive states. In other words, pleasure is the carrot that provokes us to extricate ourselves from such states, but it almost always fades quickly.

The human brain was formed by relentless competition in the natural world, so it should be no surprise that we adapt quickly to changes in circumstances. Much of life, after all, is graded on the curve. Someone who remained permanently elated about her first promotion, for example, might find it hard to muster the drive to compete for her next one.

Emotional pain is fleeting, too. Behavioral economists often note that while people who become physically paralyzed experience the expected emotional devastation immediately after their accidents, they generally bounce back surprisingly quickly. Within six months, many have a daily mix of moods similar to their pre-accident experience.

This finding is often interpreted to mean that becoming physically disabled isn’t as bad as most people imagine it to be. The evidence, however, strongly argues otherwise. Many paraplegics, for instance, say they’d submit to a mobility-restoring operation even if its mortality risk were 50 percent.

The point is that when misfortune befalls us, it’s not helpful to mope around endlessly. It’s far better, of course, to adapt as quickly as possible and to make the best of the new circumstances. And that’s roughly what a brain forged by the ruthless pressures of natural selection urges us to do.

All of this brings us back to our decisions about how hard we should work — choices that have important implications for the lives we are able to lead.

Most people would love to have a job with interesting, capable colleagues, a high level of autonomy and ample opportunities for creative expression. But only a limited number of such jobs are available — and it’s our fretting that can motivate us to get them.

Within limits, worry about success causes students to study harder to gain admission to better universities. It makes assistant professors work harder to earn tenure. It leads film makers to strive harder to create the perfect scene, and songwriters to dig deeper for the most pleasing melody. In every domain, people who work harder are more likely to succeed professionally, more likely to make a difference.

THE anxiety we feel about whether we’ll succeed is evolution’s way of motivating us. And the evidence is clear that most of us don’t look back on our efforts with regret, even if our daily mix of emotions ultimately doesn’t change.

But evolutionary theory also counsels humility about personal good fortune. As Darwin saw clearly, individual and collective interests don’t always coincide. A good job is an inherently relative concept, and while the person who lands one benefits enormously, her lucky break means that some other equally deserving person didn’t get that job.

When people work harder, income grows. But much of the spending that comes from extra income just raises the bar that defines adequate. So, from society’s perspective, some of the anxiety over who gets what jobs may be excessive after all.  But that’s very different from saying that people shouldn’t worry about succeeding.

Robert H. Frank is an economics professor at the Johnson Graduate School of Management at Cornell University.

Article source: