Tuesday, June 20, 2006

How Not To Buy Happiness

Really interesting article (.pdf) on how money does and doesn't lead to happiness.

“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.
So then why do people spend their money on things that don't bring them happiness rather than those that do?
The evidence thus suggests that if income affects happiness, it is relative, not absolute, income that matters.

As even the most ardent free market economists have long recognized, the invisible hand cannot be expected to deliver the greatest good for all in cases in which each individual’s well-being depends on the actions taken by others with whom he does not interact directly.

Many important rewards in life: access to the best schools, to the most desirable mates, and even, in times of famine, to the food needed for survival depend critically on how the choices we make compare to the choices made by others.

Yet when all spend more on heavier cars and more finely tailored suits, the results tend to be mutually offsetting, just as when all nations spend more on armaments. Spending less on bombs or on personal consumption frees up money for other pressing uses, but only if everyone does it.
We are in an arms race with others for a relative advantage is material goods which leads to happiness. Unfortunately, we also end up canceling out our happiness when everyone buys larger houses and bigger cars. If we instead spent our money on things like reducing traffic and lowering pollution, happiness would be increased for all.

via A Jolly Socratic Science via Boing Boing

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