Wealth and Happiness

So, how come this is true?

British families are healthier and twice as well off as they were two decades ago but are no happier, according to an official survey.

Life expectancy has increased significantly over the past 35 years for both men and women, while the number of people dying from heart disease and strokes has markedly declined, figures have disclosed.

Household wealth and expenditure also doubled in Britain between 1987 and 2006, the Office for National Statistics (ONS) said in its Social Trends survey. Yet despite this boost in health and wealth, levels of contentment remain virtually unchanged.

Between 1973 and 2006, people\’s satisfaction levels have hovered around an average of 86 per cent.

The ONS said the plateau effect was an example of the "Easterlin Paradox", in which the relationship between income and happiness declines after a certain level of wealth is reached.

"In the UK, as in the United States and many other countries, life satisfaction overall has levelled off, despite increasing real economic wealth," said Paul Allin, an ONS spokesman.

Now we know that this result is going to be used (as it already has been at great length by such as Richard Layard and at shorter by Polly) to justify all sorts of confiscations of wealth and income to be spent upon pet schemes. If increasing wealth doesn\’t make us happier, then such confiscations won\’t make us unhappier. There will also be the Greens stating that as economic growth doesn\’t make us happier then there\’s no problem in stopping it in praise of Gaia.

And there I think is the point. I\’m perfectly willing to agree that the absolute level of wealth doesn\’t make us happier. But (and I\’m sorry, I\’ve forgotten where I first saw this idea floated) that doesn\’t mean that changes in wealth have no effect upon happiness.

The thought is that living in an economy where things are, in general and year by year, decade by decade, getting better, is what creates that high level of contentment. "Things Can Only Get Better" being something that we humans rather like to feel. A static economy, or worse, a shrinking one, do not offer that same feeling of general well being.

It\’s not the level of wealth, it\’s the direction that level is heading in. We may all already be fat upon the cornucopian choice that this liberal capitalism shtick offers us, but the happy part comes from the knowledge that tomorrow we\’ll be even fatter.

If anyone can remember who stated this in a more  formal manner I\’d be most grateful if they could tell me.

12 thoughts on “Wealth and Happiness”

  1. Perhaps you ought to amend “changes in wealth” to “unexpected changes in wealth” – it seems intuitive, to me at least, that things being as we expected them to be does not move the happiness dial.

    Will Wilkinson is the man to read on this isn’t he? This whole topic gets up my nose. Money doesn’t buy happiness? Now there’s a new idea.

  2. “Life expectancy has increased significantly”
    If you are dead you don’t have much opportunity to be happy – wealth gives us that opportunity.

  3. Life expectancy has increased significantly over the past 35 years for both men and women, while the number of people dying from heart disease and strokes has markedly declined, figures have disclosed.

    That fact has made the Lefties unhappy. How can they harp on about obesity, smoking drinking and other puritan obsessions?

  4. Maybe not many people can just sit down and say ‘cool, I’m happy’. For a lot of people their happiness quotient is highly percentaged towards consumption ability comparison. If everybody is moving up the ladder more or less equally, or the consumption ability gap is even lessening, hey presto no overall happiness growth.
    Delightfully, this means that maybe we need more poor people so as to increase overall happiness – or people could move abroad where they are comparitively richer and then feel happier. Of course they can’t admit to being as shallow as they are truly are, so they make up all kinds of moans about modern Britain as an excuse.

  5. I wonder if our lack of satisfaction has anything to do with advertising. Anyone know how much the ‘unhappiness industries’ are worth a year?

  6. Its certainly not a given that confiscation of wealth will not have an effect if increases don’t.

    I’d have thought that confiscation of wealth would make many less happy, no matter whether it was expected or not. It certainly makes me less happy to see the amount of tax taken from my pay…

  7. There must be a lot of sad Saudis around then. But they only ask selected people don’t they.
    If money doesn’t buy you happiness shop somewhere else.

  8. Pingback: Grayling on Wealth and Happiness

  9. Tim

    Looking at that ONS report, their comments on trends relate to Eurobarometer surveys.

    I think there is a real problem in comparing income or wealth (an unbounded scale) with reported survey responses that relate to a bounded scale (e.g. percentage reporting whether they are very happy, happy, unhappy or very unhappy). In the extreme, it’s just not possible to get above 100% very happy while income keeps growing. Of course, we’ll never get to the nirvana of 100% very happy but at some point no matter how much income grows it would be harder to reduce the amount of those reporting as unhappy as we’ll always have those things that psychologists recognise as causing unhappiness – divorce, deaths in the family, unemployment – and there’ll always be some genetically miserable bastards.

    Moreover – what’s wrong with a little bit of dissatisfaction among those who then get spurred on to be innovators.

    The fact remains that by far the majority of people in most western countries describe themselves as being happy or very happy but the press and the Layardistas turn the reported Easterlin paradox into some crisis of unhappiness.

  10. Pingback: Lord Layard on Happiness « Patrick’s Blog

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