Monday, September 09, 2002


Today on Life Matters with Geraldine Doogue I spoke about happiness.

Money doesn't matter much. The average Japanese can buy five times what they could after the war but is no more happy. The average American can buy 2.5 times what they could and is no more happy. Psychologist Bob Cummins from Deakin University refers to "homeostasis". He says our body regulates how happy we feel to keep our mood in a tight band, in much the same way as it regulates blood pressure and temperature. There are doubtless good adaptive reasons for doing that. Too little happiness and we'll commit suicide or forget to eat. Too much happiness and we won't bother to hunt, or look out for predators.

One way in which adaption happens is rising expections. The higher our income, the more income we feel we need. So we believe that a certain increase in our income will make us happy, but it never does. The Journal of Economic Literature article includes a graph which describes the process perfectly.

What does make us happy is work. Having a job is usually far more important to happiness than the income the job provides.

Even moving from the lowest quartile of income to the highest won't be enough to compensate for losing a job. It's worth paying money in order to be in work...

The implications for policy: a tax on employed Australians designed to create employment is a good idea. Also the economists obsession with GDP is probably the right one - but for the wrong reasons! We need high GDP not because of the goods that it will deliver us but because of the work that getting the high GDP will make for ourselves along the way!

The other thing that matters is democracy. The Swiss local government areas where citizens can take part in direct elections are far more happy than those where citizens can not. The process matters. Economists Frey and Stutzer determine this by observing that immigrants to Switzerland who can't vote, aren't made nearly as happy by living in a district with direct referenda as are those who can vote, even though they enjoy the same outcome in terms of good government.

Taken all together - the implications are that redistribution of income is a very good idea, positional goods should probably be banned (in aggregate they make people unhappy by raising expectations) jobs matter, and that democracy matters in its own right, regardless of where it leads us.

After the discussion Geraldine told me of a Background Briefing program on happiness which noted the importance of festivals. Experiences give a much bigger happiness bang for the buck than goods. (Unless it is the experience of buying the good. A new kitchen increases happiness at the time it is bought, but not a lot after that). Much of India is very poor, but poor Indians devote a lot of effort to festivals (and weddings, as some recent films make clear).

Also aftert the discussion Kathy Golllan, the Life Matters Executive Producer, told me of her amazing finding. Teaching English to upper class children in Indonesia, she asked, as a language excercise: "What would you do if you had a million dollars?" One of the replies shocked her. "I would get a job".