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Financial Hardship and the Happiness Paradox

By Shankar Vedantam
Monday, June 23, 2008

The United States is awash in gloom. Overwhelming majorities of Americans say they are dissatisfied with the country's economic direction, and the intensity of unhappiness is greater than it has been in 15 years, according to a recent Washington Post-ABC News poll. The answer, pundits, politicians and policy wonks agree, is to find a way to quickly return to economic growth.

The unstated assumption is that growth will lift the gloom and, in the long run, make America happier. If that's true, then it ought to follow that America should be much happier today than it was a generation ago -- it is much wealthier.

The question of whether the country is happier today than it was in, say, 1970 turns out to have a surprisingly good empirical answer. For nearly four decades, researchers have regularly asked a large sample of Americans a simple question: "Taken all together, how would you say things are these days -- would you say that you are very happy, pretty happy or not too happy?"

The results are sobering. Even before the current economic downturn, the United States, on average, was less happy than it was in 1970, even though it is vastly richer.

Economist Richard A. Easterlin at the University of Southern California was among the first to notice the paradoxical disconnect between a nation's economic growth and the growth of its happiness. The "Easterlin Paradox" was once thought to be limited to rich, Western countries -- but researcher Hilke Brockmann and his colleagues at Jacobs University in Bremen, Germany, recently showed that even as China has experienced extraordinary growth between 1990 and 2000, the percentage of Chinese who "described themselves as very happy plummeted from 28 percent in 1990 to 12 percent in 2000."

Recognizing this phenomenon, the mountain kingdom of Bhutan -- which is being celebrated this week in the Smithsonian's Folklife Festival on the Mall -- has decided to build its national policies not on improving its gross national product but rather on a metric called "gross national happiness."

Easterlin attributes the phenomenon of happiness levels not keeping pace with economic gains to the fact that people's desires and expectations change along with their material fortunes. Where an American in 1970 may have once dreamed about owning a house, he or she might now dream of owning two. Where people once dreamed of buying a new car, they now dream of buying a luxury model.

"People are wedded to the idea that more money will bring them more happiness," Easterlin said. "When they think of the effects of more money, they are failing to factor in the fact that when they get more money they are going to want even more money. When they get more money, they are going to want a bigger house. They never have enough money, but what they do is sacrifice their family life and health to get more money."

The irony is that health and the quality of personal relationships are among the most potent predictors of whether people report they are happy -- and they are often the two things people sacrifice in their pursuit of greater wealth. Nations, Easterlin argues, make the same mistake as people.

"In each case, the tendency is to think that more money is going to be the solution to all your problems," Easterlin said. "The tendency is to allocate excessive amounts of your resources to getting more money, to pursue economic growth if you are a country or to increase your income if you are an individual. . . . The result is you are pursuing a goal that is ever receding."

Not everyone agrees with Easterlin and his economic-growth-is-not-the-way-to-happiness theory. Ruut Veenhoven, a sociologist in the Netherlands and the director of the World Database of Happiness, argues that wealth is actually a very reliable predictor of happiness. If you take a snapshot of people in different countries, he argues, the data shows that people in Denmark, Switzerland and Austria report being happier than people in the Philippines, India and Iran, and the people in those nations report being happier than those in Armenia, Ukraine and Zimbabwe.

Veenhoven has even come up with a measure similar to one used by public health officials to measure the burden of disease -- how many years of happiness a person might enjoy in different countries. The Swiss apparently have the highest number of "happy life years" -- 63.9 -- while Zimbabweans have the least -- 11.5. People in the United States have an average happiness of 57 happy life years.

Some of the difference between Easterlin's and Veenhoven's conclusions has to do with the difference between taking snapshots of the data vs. taking a video. In the snapshots, wealth and happiness do seem to go hand in hand. But over time, in the videos, the connection seems to disintegrate.

Easterlin does not dispute that people in Denmark report being happier than those in Zimbabwe. But he does dispute the implication -- that the Danes are happier because they are wealthier.

"The Danes have social welfare policies directed toward some of the most salient concerns of families -- their health, care for the aged, child care," he said. "If you ask why the Danes are happier, an alternative hypothesis is they have a set of public policies that deal more immediately with people's fundamental concerns."

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