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HAPPINESS INEQUALITY: How to enjoy life for free?

HAPPINESS INEQUALITY: How to enjoy life for free?
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Photo: capgemini.com

 

“Money can not buy happiness!” – a formula that humanity discovered many centuries ago. Modernity has significantly clarified it: “But in their quantity!” At the same time, how much money is needed for happiness is still a controversial issue …

 

“PARADOX OF ISTERLINA”

 

At the end of the 19th century, the English economist Alfred Marshall formulated the law of “diminishing marginal utility”. Its meaning is that for the consumer the value of each subsequent “portion” of the consumed good decreases. The Easterlin paradox, named after the American economist Richard Easterlin, says about the same.

In the mid-1970s, he showed that people quickly get used to a high standard of living as a social norm. They compare their wealth not with the previous level, but with the wealth of others. And, if it is the same plus or minus for everyone, it does not make people happier. So, by 1970, since post-war Japan, GDP per capita has grown by about 7 times.

But in comparison with 1950s, there are even fewer happy and contented Japanese people. How this is possible, Easterlin explained, quoting the American sociologist George Homans: “Any attempt to satisfy the needs of humanity is doomed to failure. Any satisfied desire creates a new desire that a person wants to satisfy”.

 

AWAY “FETISHISM GDP”!

 

Paradoxes like these have led economists and politicians to ask the question: if economic growth does not lead to an increase in happiness, then does it make any sense at all for human communities, other than statistical? Therefore, since Easterlin’s time, attempts have been made to stop linking social well-being to economic performance.

So, in the 1970s, the king of Bhutan, in full agreement with the principles of Buddhism, declared that the happiness of the people is more important than the figures of the gross national product. Later, he found an unexpected ally in the person of the Nobel laureate Joseph Stiglitz, who called on the world to move away from the “fetishism of GDP”.

Together with another Nobel laureate Amartya Sen and French economist Jean-Paul Fitoussi, he even published the book Mismeasuring  Our Lives: Why GDP Doesn’t Add Up.

It was written following the results of the work of the commission, the creation of which was initiated in 2008 by French President Nicolas Sarkozy. The authors proposed 11 indicators, on the basis of which the OECD Better Life Index and the UN Human Development Index were compiled.

 

HOMO ECONOMICUS DOESN’T GIVE UP

 

If we assume that it is impossible to make a person happy with economic methods, then it undermines the “foundations of the foundations”- everything that modern Homo economicus believes in and is guided by in the era of “developed capitalism”. Fortunately, the situation was saved by the study of Americans Betsey Stevenson and Justin Wolfers, who undertook to refute the “Easterlin paradox”.

Based on the statistical indicators of 130 both poor and rich countries, they established a linear relationship between GDP and the subjective sense of their own well-being. That is, the growth of the first leads to the growth of the second.

In 2015, Angus Deaton reviewed, confirmed and refined these studies, for which he received the Nobel Prize. He took the Gallup sociology of 132 countries and found that doubling national income per capita adds 1 point on the happiness scale.

 

HAPPINESS IN THE MORNING – MONEY IN THE EVENING

 

Despite the fact that almost no one disputes such dependence today, the question of the causes and consequences of this phenomenon remains unresolved. In the late 90s of the last century, economist Charles Kenny suggested that those countries that created the environment and conditions for a “happy society” begin to grow economically. That is, to paraphrase the writers Ilf and Petrov, happiness in the morning, money in the evening.

The creator of the World Happiness Survey, sociologist Ruth Wienhoven from the Netherlands, names material well-being, economic and political freedoms, equality, security and conformity with “modernity” among the conditions necessary for happiness.

He built complex graphs for different countries, and in 75% of the cases the listed parameters determined the difference in the level of “macro part”, which in general can be interpreted as the presence of a predictable environment.

 

“MACRO- AND MICROHAPPINESS”

 

In contrast to the macrolevel, at the individual level, modern behavioral economics studies interpret the relationship between happiness and income somewhat differently. On the whole, in contrast to the “macro-happiness”, the “micro-happiness” turned out to be not free from the “Easterlin paradox”. By and large, it all boiled down to the empirical truth – “happiness cannot be bought for money!”

The value of an extra dollar for the poor and for the rich is obviously different. Due to the fact that people psychologically very quickly adapt to the level of material wealth, a rich person needs more and more money to be happy.

A study by Peter Raberton of the University of California showed that monthly bank account growth raises life satisfaction, but up to a certain level! From 1 to 1000 pounds – 2 points out of 20, and from 1000 to 10,000 – only 0.7 points.

 

SATURATION POINT

 

Nobel laureates in economics Daniel Kahneman and Angus Deaton have generally proposed to distinguish satisfaction with life from happiness. Surveys of 450,000 Americans, conducted in 2008-2009, showed that “to be happy” they need no more than $ 75,000 a year – with large numbers, the effect decreases. Life satisfaction, on the other hand, grows along with earnings of about $ 120,000 a year or more.

Kahneman and Deaton hypothesized that saturation point occurs when income levels are no longer conducive to new life experiences. And this, in turn, leads to the fact that life satisfaction decreases.

Of course, the saturation point research did not end there. Scientists have no doubt that it is definitely there, but they debate about the threshold values. However, it happens that the “Easterlin paradox” stops working at the micro level. Especially when it comes to buying experiences, not things.

 
HAPPINESS INEQUALITY: FREQUENCY DOES MATTER!

 

Scientists have found that for the feeling of happiness, it is not just the fact of experiencing a positive emotion that is important, but the frequency with which it happens. Harvard researcher John Yachimovich surveyed 22,000 people and found the “happiness inequality” effect. A high level of income makes it possible for its owner to switch more often from one experience to another.

And in this sense, Richard Branson and Jeff Bezos, who arranged a kind of “battle for space” among themselves, have a much better chance of “frequency of happiness”. But people, whose well-being is incomparably less, will experience it with the same intensity, but less often.

As a result, they will simply have less happiness per unit of time. Therefore, if you do not have money for a flight into space, learn to arrange for yourself a lot of varied joys, not always expensive – alternative sports, books, travel, chatting with friends – and then a feeling of happiness is guaranteed to you!

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