How not to buy happiness.

An enduring paradox in the literature on human happiness is that although the rich are significantly happier than the poor within any country at any moment, average happiness levels change very little as people's incomes rise in tandem over time. (1) Richard Easterlin and others have interpreted these observations to mean that happiness depends on relative rather than absolute income. (2)

In this essay I offer a slightly different interpretation of the evidence--namely, that gains in happiness that might have been expected to result from growth in absolute income have not materialized because of the ways in which people in affluent societies have generally spent their incomes.

In effect, I wish to propose two different answers to the question "Does money buy happiness?" Considerable evidence suggests that if we use an increase in our incomes, as many of us do, simply to buy bigger houses and more expensive cars, then we do not end up any happier than before. But if we use an increase in our incomes to buy more of certain inconspicuous goods--such as freedom from a long commute or a stressful job--then the evidence paints a very different picture. The less we spend on conspicuous consumption goods, the better we can afford to alleviate congestion; and the more time we can devote to family and friends, to exercise, sleep, travel, and other restorative activities. On the best available evidence, reallocating our time and money in these and similar ways would result in healthier, longer--and happier--lives.

The main method that psychologists have used to measure human well-being has been to conduct surveys in which they ask people whether they are: a) very happy; b) fairly happy; or c) not happy. (3) Most respondents are willing to answer the question, and not all of them respond "very happy," even in the United States, where one might think it advantageous to portray oneself as being very happy. Many people describe themselves as fairly happy, and others confess to being not happy. A given person's response tends to be consistent from one survey to the next.

Happiness surveys and a variety of other measures employed by psychologists are strongly correlated with observable behaviors that we associate with well-being. (4) If you're happy, for example, you're more likely to initiate social contact with friends. You're more likely to respond positively when others ask you for help. You're less likely to suffer from psychosomatic illnesses--digestive disorders, other stress disorders, headaches, vascular stress. You're less likely to be absent from work or to get involved in disputes at work. And you're less likely to attempt suicide--the ultimate behavioral measure of unhappiness. In sum, it appears that human happiness is a real phenomenon that we can measure. (5)

How does happiness vary with income? As noted earlier, studies show that when incomes rise for everybody, well-being doesn't change much. Consider the example of Japan, which was a very poor country in 1960. Between then and the late 1980s, its per capita income rose almost four-fold, placing it among the highest in the industrialized world. Yet the average happiness level reported by the Japanese was no higher in 1987 than in 1960. (6) They had many more washing machines, cars, cameras, and other things than they used to, but they did not register significant gains on the happiness scale.

The same pattern consistently shows up in other countries as well, and that's a puzzle for economists. If getting more income doesn't make people happier, why do they go to such lengths to get more income? Why, for example, do tobacco company CEOs endure the public humiliation of testifying before Congress that there's no evidence that smoking causes serious illnesses?