Blogs | November 29, 2010

Gross national happiness

The then British prime minister, David Cameron, once asked for the well-being of the UK public to be regularly measured. He said: “Prosperity alone cannot deliver happiness." Do you agree?

Can economic growth be enough to make us happy? There is a strong case to argue that happiness depends more on our own actions than government policy. This raises a question: how can we make ourselves happier?

We want to be happy, naturally
Conventional economics has a simple answer on how to make ourselves happier: It says that people already try to maximise happiness – or what economists call utility – so we should just carry on doing what we're doing. However, there's increasing evidence that our efforts to maximize our happiness can backfire, as our choices don't always make us happier. A big reason for this lies in what George Loewenstein of Carnegie Mellon University calls projection bias: we exaggerate the degree to which our future tastes will resemble our current ones. So, for example, if we go shopping on an empty stomach, we'll buy more food than we would if we shop just after a meal.

Can money buy happiness?
One effect of this projection bias is that we exaggerate the extent to which money will buy us happiness. In truth, though, it does so only slightly. Andrew Oswald of the University of Warwick measured the mental well-being of winning the lottery. He found that for an average person (the 50th happiest person out of 100 people), a win of £50,000 (€59,000) raised them to being only around the 42nd happiest. Money matters then, but not very much. So what does? Here are a few things economists have found.

Happiness is ... a short commute
First up, economists say commuting is bad for us. Researchers at the University of Zurich have estimated that the average person who spends 46 minutes a day travelling to and from work would need a pay rise of 19% to be as happy as the average person who doesn't commute. This is based on experience in Germany, which has a well-run public transport system. So, if you're thinking of moving to a job further from home, it might pay in happiness terms to make sure you get a very big pay rise.

Happiness is ... friends and family
Secondly, friends and family have been found to make us happy. Academic Nattavudh Powdthavee researched and put a price on this. He estimates that, for the average English person, seeing friends or family on most days rather than once or twice a week increases happiness by as much as would a pay rise of £15,000 (€18,000) a year. This sounds a lot – but this is because higher incomes increase our happiness only slightly.

Happiness is ... being healthy
Thirdly, research suggests looking after your health. Dr Powdthavee also finds that someone whose health deteriorates from excellent to very poor would need a pay rise of almost £500,000 (€589,000) to compensate for the loss of happiness.

Happiness is ... marrying someone like you
Fourthly, get married – but to someone of similar education. Dr Powdthavee estimates that being married – for the average person – raises happiness by as much as a pay rise of £50,000 (€59,000) a year. However, Bruno Frey of the University of Zurich points out that people's happiness falls in the years after marriage, as the honeymoon effect wears off. But the fall-off is much sharper for those couples with big differences in educational attainment.

Happiness is ... limiting TV time
Fifthly, don't slump in front of the TV. Professor Frey has also found that people who watch lots of TV are unhappier than those who watch less – and this might not be because unhappy people have nothing better to do than watch TV. It could be that we regret our laziness in doing nothing better than watching the box; other research shows that doing voluntary work makes us happy. Or it could be because in watching TV we are not socialising with friends and family; Benjamin Olken of the Massachusetts Institute of Technology has found that villages in Indonesia with poor TV reception have better social lives than villages with good reception.

Happiness is ... being employed
Above all, though, economists agree upon one thing - if you want to be happy, keep your job. Research on the policy portal Vox finds unemployment reduces happiness by much more than just the loss of a wage. Working is like living – it might be miserable at times, but the alternative is worse.


Chris Dillow
Chris Dillow

Investors Chronicle writer and economist