A Read for us All on Easter Sunday - Money Doesn't Make us Happy -

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Money Doesn't Make People Happy


Tim Harford 02.14.06,
12:00 PM ET


hippies," claimed economist Andrew Oswald recently, "are having their
quiet revenge." Oswald, a professor at Warwick University in England,
is one of a growing number of economists fascinated by the question of
what makes us happy. In a recent public lecture he announced, "Once a
country has filled its larders, there is no point in that nation
becoming richer."

That, at least, should bring a smile to a few
faces. Economists have suddenly realized that money can't buy you
happiness? This is like the squarest kid at school suddenly discovering
beer, girls and music in his 30s. The rest of the world had worked it
out already.

One of the things that excites economists like
Oswald is the ability to compare data on wealth, education and marital
status with the results of happiness surveys. In these surveys, people
are asked such questions as "Taking all things together, would you say
you are very happy, quite happy, not very happy, not at all happy?"
Economists have been trying to make sense of the results across
individuals, across countries and across the years. The headline: Once
a country gets fairly rich (though much poorer than the United States),
further economic growth does not seem to make its citizens any happier.

money does not buy happiness. Or does it? "In every society, at any
point in time, richer people are happier," points out Will Wilkinson, a
policy analyst at the Cato Institute in Washington D.C., who runs a
blog on happiness research and public policy. "But that in itself
doesn't tell you much about the relationship between money and

Richer people, after all, tend to have high-status
jobs. They tend to have more control over their lives at work--why pay
someone six figures if you're not going to ask her to use her own
judgment? They also have higher expectations and will be comparing
themselves to wealthier people. It's hard to say what is really driving
the results: money, status or expectations.

Perhaps each
society's richer people are also happier because happiness comes not
from absolute wealth but from relative wealth--recall H.L. Mencken's
quip that "a wealthy man is one who earns $100 a year more than his
wife's sister's husband." A more skeptical view is that while it means
something to compare my happiness with that of the guy asking me for
change on the street, it means nothing to compare my feelings today to
those of my grandfather in 1950--or those of a Portuguese shopkeeper or
a Japanese salaryman.

Wilkinson and economists like Oswald and
his compatriot Lord Layard are thinking about the policy implications
of happiness research. My own interest is a little different: Can the
new breed of happiness economists offer us any tips for happier living?

of the advice is pretty slippery. For instance, married people are much
happier than single people. So perhaps you should get married? (Even
better if your fiancée's sister's husband is unemployed.) Not so fast.
More sophisticated surveys show that the causation runs both ways:
Happy people tend to find spouses, while those suffering from
depression don't find it so easy. And--not surprisingly--some people do
brilliantly out of marriage, and others are utterly miserable. As an
economist, I'm afraid I have no idea whether you should propose to that
cute girl you've been seeing. (You may or may not take comfort in
Oswald's finding that you can always get out of marriage: People are
happier immediately after a divorce than immediately before.)

also suggests self-employment, if you can pull it off without losing
out financially. "Everything associated with
self-employment--independence, autonomy--is also associated with being

Both Oswald and Richard Layard argue that relationships
are more important than money--and that includes professional
relationships. "I've come to believe in the old-fashioned view that one
should be tender in one's dealings with colleagues," Lord Layard told
me in an interview. And what else? "Think about what you have rather
than what you don't have, both materially and in your relationships and
your personal strengths. To use the language of economics, don't try to
rectify things that aren't your comparative advantage."

This is
spiritual thinking from an economist, but Oswald goes one better. If
you're depressed, why not just wait? "There's a kind of J-curve
describing happiness over time. Your late 30s are the most unhappy
period of your life, but then the older you get the happier you are.
Life really does begin again at 40."

I think the most useful
research, though, is by an honorary economist: Danny Kahneman, the only
psychologist ever to win the Nobel Prize in economics. He asked nearly
1,000 working women in Texas to reflect on their previous day, list the
different episodes in it, what they were doing and how they were

Some results are predictable enough: Work is
miserable, and commuting is worse. Others are not so obvious. For
instance, praying is fun, but looking after the kids is not. Spending
time with your friends is one of the most enjoyable things you can do,
but spending time with your spouse is merely OK. In fact, parents or
other relatives turn out to make more enjoyable company than the
supposed love of your life.

What is perfectly clear, though, is
that socializing with anyone except your boss makes you feel good. Sex
is best of all. This is handy advice at last. But what if you are
having sex with your boss? Whereof economists cannot speak, we must
remain silent.

Tim Harford, a Financial Times columnist, is the author of The Undercover Economist.