This research immediately reminded my of Daniel Gilbert's Stumbling On Happiness, which is a wonderful read. The book details many of the myriad ways in which we fail at predicting the affective result of various outcomes. For example, people will predict that they'll feel just awful for months after an election if the opposing candidate wins, yet report no change in happiness in as little as a month after their candidate loses. Amazing stuff.
Another salient point is that we almost never take into account the fact that we accommodate to the conditions around us. We truly believe that if we win the lottery we will be happy forever, even in the face of mountains of data to the contrary.
The most surprising result, I thought, was that (in the late 1990s U.S. dollars) happiness begins at $40k per year, and increases only slightly for incomes up to $100k per year, and then is essentially flat. One of the drivers for this was that, at $40k per year, you typically get health insurance through work, and this removes the primary worry that brings people's happiness down.
I think the really interesting thing would be to see if you could convince rich people of this so that they voluntarily, without legal compulsion, would give up some of their wealth to make others happy. I'd be interested to see if I would do this, if I ever became a .com/web 2.0 zillionaire.
The problem is that most people spend the money they have, expecting more possessions to improve their subjective well-being.
There are some exceptions to the "money doesn't buy you happiness" rule, my favorite of which are:
- Spending a lot of money on loved ones or favored charities does tend to make people happier
- Having a lot of savings makes people more apt to handle negative shocks
It is, however, extremely difficult to resist the temptation to spend excess cash even if you know of and believe the research that it doesn't make you feel any better.
The real problem: asking people "are you happy?" isn't a good metric of their well-being. The answer you get is determined mostly by (a) their personality and (b) what's happened in their lives over the past few days (whether good or bad).
But that isn't the same as saying that there are no differences in well-being throughout someone's life. If I lose both my legs tomorrow I'll probably feel bad for a while but after a couple of years learn to cope with my new situation and return to my baseline level of happiness. That doesn't mean that chopping off my legs is essentially a cost-free exercise to me though.
Any populist arguments completely fail to take into account the sheer volume of poor people. Even if you had a 100% tax on all income over 50k a year and a 100% tax on all corporate profits over 50k a year per employee, you wouldn't have enough money to give everyone a middle class lifestyle.
and that is if we don't even take into account the extreme inflationary forces that would take hold if everyone made middle class money. If you tried this in reality all that would happen is that prices would rise until that middle class income reflected the buying power that a lower class income previously did.
You can't magic a high standard of living into existence by giving away money (see Iceland). To think that you can is a fundamental misunderstanding of what money is. Steve Jobs doesn't make millions of dollars because he got lucky in an unfair game with arbitrary rules. He makes it because he creates millions of dollars in value to people.
> you wouldn't have enough money to give everyone a middle class lifestyle.
What's a "middle class lifestyle"?
I ask because poor people in the US have a lot of things that might be considered luxury items in other places, such as TVs, microwaves, cars, and so on. (One of my favorite examples is someone who ranted "I'm homeless. Me and my five children have to share a two bedroom apartment.")
exactly, by all reasonable metrics we already have achieved the ideal of a baseline below which people can't fall. the cries of more aid for the poor when the aid already given is distributed inefficiently and unfairly seems disingenuous at best and power seeking at worst.
well, $10,000 is surely the average. I believe it would be more accurate to say that once peoples income exceeds their basic living expenses by some factor it does not make them any happier.
how can I take this article seriously when it has "experts" spouting this? So most economists worry about how taxes discourage people from working, but in fact, taxes can be encouraging people to have a less feverish pace of life and to focus more on time with friends and family rather than consumption.
I don't even know how to respond to that sentence.
then there is this:
a dollar is worth 10 times more to a poor person than to a rich person whose income is 10 times higher
the idea of a decreasing marginal utility for money is not based on any scientific research.
<snip>how can I take this article seriously when it has "experts" spouting</snip> [that] $10,000 is surely the average [income per capita] is the average [and that] once peoples income exceeds their basic living expenses...it does not make them any happier.
This seems to square well with Daniel Gilbert's work on happiness as well. $40k/year for a family of four it $10k/capita. And I think we can at least take it seriously (even if we disagree) because there really is research behind these claims. Maybe we don't like the policies that the conclusions seem to warrant, or maybe we can point to methodological flaws in that research, but dismissing the claims outright is a bit premature.
So most economists worry about how taxes discourage people from working, but in fact, taxes can be encouraging people to have a less feverish pace of life and to focus more on time with friends and family rather than consumption.
I don't even know how to respond to that sentence.
Though the construction is a little awkward, he seems to be saying that taxes do reduce the incentive to work, but that this is a good thing, because they are inadvertently spending their time on the things that do empirically increase happiness. In other words, the proposed indirect approach of reduce taxes -> increase hours -> higher income ->increase happiness may be less effective than the proposed raise taxes -> more free time ->increase happiness. I'm not saying I agree with either one, just that it's not incoherent.
the [sic] idea of a decreasing marginal utility for money is not based on any scientific research.
From the article: We now have evidence that shows the extent of the difference, which is roughly that a dollar is worth 10 times more to a poor person than to a rich person whose income is 10 times higher. Remember, we're not talking about the power of a dollar to buy goods, but rather its power to buy happiness. Marginal utility certainly applies to the goods purchased, and the starving man's steak brings more happiness to him than does the CEO's.
Since when are populist arguments about starvation?
last I checked the majority of poor Americans are fat.
"we now have evidence" counts as evidence? I'm sorry but I need to see that evidence because it is exactly the type of study that can lead to wildly different conclusions based on priors.
I've said this many times: relief should go primarily to the children of outright destitute people. Children should not pay for the ignorance of their parents. If we have any money left over? great. But the kids need to come before the drug addicts.
My mother is on government assistance and vacations in europe every year while children go hungry.
The conclusion -- that we can tax most of a CEO's income and he will be just as happy -- ignores the fact that people do what they do because they think it will make them happy, not because it actually makes them happy.
Sure, you can tax that CEO down to a base-level salary, then prove via a survey that he was just as happy in a year's time. But what about the next CEO-to-be? He is willing to do extraordinary work for extraordinary rewards, because he thinks it will make him happier -- even though it won't. He may take a look at the heavily taxed existing CEO and decide that the extraordinary effort is not worth the modest rewards, even though he'd have been just as happy having made the effort. So he doesn't try as hard, and society as a whole is denied whatever product or service he would have created.
In general, some level of dissatisfaction is what drives us to better ourselves, and it's suspiciously convenient that we humans don't need much to be happy and yet always expect to be happier with more. Legislatively removing the incentive to pursue greater happiness -- even though it can be shown that we don't need it and can't get it -- is playing with a complex process that could have unintended consequences. Society's happiness as a whole could suffer.
It seems to me anyone interpreting economics in such a literal sense is entirely missing the point. I would expect true economics to be not about people maximizing their monetary income, just as mathematics is not about numbers. The reason that many economics papers talk about money is that it is a convenient substitute for a measurement of well-being. But you can just factor any other measurement into the economic models and the outcome should be the same. The gist is, people make decisions to somehow maximize their "whatever it is, happiness, well-being, whatever". It is entirely feasible to think that individuals have individual "whatever it is things" - one might strive to have more time for his family, the other might strive for a luxury house and a Ferrari. Contrary to what the article suggests Economic theory has no problem with that at all.
It is also untrue that 50 million $ could make ever so many people in Africa happy - the problem is not raising the money, the problem is getting it to the people.
Finally, I would have wished for more details on how the happiness for people was determined. Maybe there is some kind of "bootstrapping fallacy" in it - if "1 dollar makes a poor person 10 times as happy as a rich person", the poor person is likely to give a higher rating for it's own happiness than the rich person - in turn distorting the scale the happiness researchers is trying to create.
Maybe brain scans would be a way for objective measurement of happiness, but even with that I would remain skeptic for a very long time.
Another thing that should be taken into consideration is competition. It is fine if your goal in life is to raise fine flowers in your garden, but if your neighbor's goal is to build a 50 story skyscraper at the place where your garden is, just seeding flowers won't be sufficient to maintain your happiness. You might still be forced to move to where the money is so that you can keep your flower hobby. In other words, evolution theory has to be considered when trying to determine people's goals - only "evolutionary stable" goals can prevail. People whose goal in life is to commit suicide don't stand much of a chance in the long run.
Happiness is best studied at an individual's cognitive level. I don't think that by the time you aggregate it and compare it to income the numbers have any meaning whatsoever. Lots of correlation in the world. Lots of folks who don't know science. Lots of folks who don't know the history of various governmental schemes and how they failed (or worked).
In a way, because it's provocative, it's really kind of sad. A commentary on the average state of discourse.
Years ago, with a bunch of college buddies, I was watching the "Howard Stern Show" and a caller came on and Stern was evidentally in a bad mood and the caller was somewhat incoherent and eventually Stern hung up on him because of the combination thereof...
Anyway, the producer (baba boey) came in an explained what the caller was trying to ask [paraphrase]:
"That guy wanted to arrange a surgeon to install an electrode into his brain so that electricity could be shot into his pleasure nerves (like rats in various experiments)"
!!!
I had thought about this long ago as a potential SUPER drug. Just turn on the juice, and you've got a 1000 hits of cocaine at 15 cents a KW/hour. I'm still pissed that Stern hung up on that guy, because he probably could have arranged an experiment. Can you imagine if that became popular?
That experiment was done, google for it. It is quite amazing/shocking. The guy with the electrode apparently pushed the button thousands of times within a short period of time. It's just scary to think - I suspect nobody would have the will power to escape that drug. Which in turn shows how clever nature has programmed us (somehow making us DO things), and how little we really determine our fates.
For these sorts of questions, the water is very muddy in the US, due to the proliferation of consumer goods. That's the thing that happens in a rich society; people who are unhappy for social and economic reasons (shitty health coverage, unable to afford ridiculous housing/higher education costs) are still able to buy a lot of trinkets which, of course, fail to deliver on the hedonic promise. Rich is definitely better than poor, but clutter does not equate to wealth, and often makes a person worse off rather than happier.
Someone might be unhappy because of his mediocre health coverage (even the insured are screwed), low occupational autonomy, meager two weeks' vacation allowance, inability to reach the level of stability necessary to responsibly procreate, et al. He's 35 and not really poor; he has enough discretionary income to buy a $30,000 SUV-- which would be considered a luxury outside of the US (in Europe, because of the high gas prices moreso than the cost of the car). He does this to procure "happiness". It fails him (he returns to baseline) after three weeks. Why did he buy it? Because he lacks the power to make meaningful improvements to his life, whereas trinkets are cheap.
"Consumption" is a poor predictor of happiness because most consumptive activity is utterly devoid of hedonic value. On the other hand, increased security and autonomy would make people legitimately happier.
The commies just won't give up. After the obvious failure of state planning in the 20th century they were short on angles. First they tried their government heavy brand of "environmentalism" as a way to boss everyone around. Now they've found "happiness research" as a propaganda tool.
- Unjustified name-calling irrelevant to the point of the article.
- Compared to the other groups influencing society (marketing departments, political parties, artists, The Media), modern environmentalists and "commies" are 1. powerless 2. arguably beneficial, if perhaps not trustworthy as a factual source.
- Calling your point-of-view "obvious" on a complex topic is Proof By Intimidation.
Just wondering, why the obsession with happiness? As a society, shouldn't we be out for the greatest output so that we can crush all other societies and take over their resources (violently or not)?
Are you sure? What if the other societies do that and crush us? How do you eliminate competition? And would we really thrive without competition? I doubt it, as it has many healthy side effects.
No, but if the other guy is richer, you will either start to emulate him (and become richer and more like him yourself), or he will eventually become a stockholder of yours at which point, he has effectively taken over. Do this across generations, and you have societies taking over others. It is no coincidence that no one emulates the society of Soviet Russia but everyone across the world emulates the rich high-output western ones.
Another salient point is that we almost never take into account the fact that we accommodate to the conditions around us. We truly believe that if we win the lottery we will be happy forever, even in the face of mountains of data to the contrary.
The most surprising result, I thought, was that (in the late 1990s U.S. dollars) happiness begins at $40k per year, and increases only slightly for incomes up to $100k per year, and then is essentially flat. One of the drivers for this was that, at $40k per year, you typically get health insurance through work, and this removes the primary worry that brings people's happiness down.
I think the really interesting thing would be to see if you could convince rich people of this so that they voluntarily, without legal compulsion, would give up some of their wealth to make others happy. I'd be interested to see if I would do this, if I ever became a .com/web 2.0 zillionaire.