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Economic Prosperity and Happiness: Is There a link?

By       Message Reza varjavand     Permalink
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The U. S. position as the economic superpower of the world has been steadily challenged in recent years by some other countries. Nevertheless, this country still possesses the biggest economy and has remained the top political power in the world, having the largest Gross Domestic Product and one of the highest per capita incomes among industrialized nations.   It is tempting to think that materialistic progress will enhance our overall level of welfare and promote happiness. However, we are more skeptical about that proposition now than ever before, thanks to the findings of scores of scholarly researchers. For instance, a growing number of people in the United States do not necessarily enjoy a more peaceful and worry-free life despite the robust prosperity, enormous wealth, and high standard of living created in recent decades. Fear and anxiety, perpetuated by the milieu and often triggered by the inability to fulfill inflated materialistic expectations, are rampant. Such malignant feelings are growing and taking over the lives of many Americans. The resulting social and psychological disorders seem to have become acutely ubiquitous. More noticeably, these often unfounded fears are created by greedy entrepreneurs and injudicious politicians, and are reinforced by mass media communications and fear mongering marketing schemes. Dubious fears seem to have touched all aspects of life, fears of things that may not even happen, or have indeed an infinitesimal chance of happening. Mental disorders, the offshoot of trepidation and anxiety, seem to have reached alarming proportions in this country, and other related maladies may be latent. Three out of the best selling prescription drugs worldwide, Seroquel, Effexor, and Lexapro are used to treat depression and have annual sales amounting to about $9,800 million. Most other best selling drugs are used to treat high blood pressure and heart diseases that are mainly aggravated by stress and anxiety. While our fixation on material progress has provided us with more convenient lives, it seems also to have created in us a flawed sense of happiness and social welfare.

The preceding argument reminds me of a cliche and a proverbial question that seems to have no objective answer: Are rich people necessarily happier? Ross Perot, a billionaire businessman and one time presidential candidate once said "Now thanks to the success of my company, I have been financially successful. But I am not one bit happier than I was as a boy in Texas in the Depression. I am not one bit happier than I was when Margo and I drove into Dallas when I got out of the Navy, with everything I owned in the trunk of our car." A f ew weeks ago, the younger son of the infamous former Shah of Iran, Prince Ali Reza, committed suicide at the age of 44. The Prince's younger sister, Princess Leila, also killed herself a few years earlier. Apparently, they were both disgruntled with their seemingly unhappy lives to the point that triggered their tragic decision to end it all. The sumptuous life style they enjoyed and their access to a vast amount of money and other wealth bequeathed to them by their late father did not prevent them from ending their lives. Observations like these can certainly tell us that money alone does not produce about happiness. I am not of course rejecting the link between wealth and happiness unequivocally. No doubt, there is a positive correlation between the two as suggested by common sense as well as the findings of many scientific surveys. However, the general consensus is that a positive association between money and happiness is limited and temporary at best. For instance, people who win big sums of money on TV game shows, contests, or in a lottery, surely display immense impulsive joy. They can be seen in media video vigorously jumping up and down and crying uncontrollably, an understandable facile reaction. However, their money-driven jubilation might be short lived and not permanent. It has been documented that some will eventually shed the vestige of premature euphoria and return to where they were before wining. And, the realities of possessing wealth and its limited guarantee of happiness set in.

Many of us may have heard the adage that money cannot buy happiness. Money per se may not generate long-term happiness because it does not have any intrinsic value--value derived from life-enhancing benefits. However, as most of us living in the real world know, money is extremely useful when trying to obtain goods and services that allegedly make us happy. Demand for the things that make us happy can be saturated, and after a certain point, additional demand brings no more happiness. Water, for example, is a most vital commodity; it is so vital to our life that we cannot live without it. We consume water for every conceivable use. That is, demand for water is quite satiated, having access to more water does not make us any happier. To make a long story short, material progress may not create social or personal contentment, nonetheless, this does not mean that it is irrelevant or it impedes happiness. Whatever is the strength of the relationship between wealth and happiness, please do not ask economists to estimate the coefficient of correlation between these two. They are humorous enough to calculate it to the nearest integer!

One can also argue sensibly that if rich people are happier, it is not because they have more money. Rather, it is because of what earning money represents socially and personally, human accolades: success in business, personal accomplishment, status, and self confidence. These are the qualities that make rich people happier. Windfall money, like winning the lottery, does not represent any such personal attainments; it is just the upshot of good luck. In addition, if rich people are happier, that is because they can afford high quality basic life necessities ranging from food and shelter to healthcare for themselves and their kids as well as good education that eventually leads to better jobs, higher social status, and a growing circle of rich friends and associates. They can also immerse themselves in an array of leisurely activities that no doubt elevate the level of their happiness. If a rich man happens to live in a Muslim country, he can also afford to have more than one wife.   In light of this, who can resist the claim that nothing makes a man happier than a well diversified portfolio of wives--harem for sure--to fulfill his sexual fantasies. Overall, rich people are generally more satisfied with their lives but there is no solid ground to argue that money is the source; it is rather the availability of what they can acquire with their money.

Economists assume that happiness, utility as they call it, is individual-specific. People are the best arbitrators of their own welfare and they make choices they believe make them most happy. However, often what they end up with may not be quite what they had hoped for. Because of the subjective nature of happiness, there is no scientific way to measure it or to compare it across individuals. If I tell my students, for instance, that I am going to give away $100 to any person if he or she can attain the maximum amount of pleasure by spending it and prove he/she accomplished this, I can be certain that I will never have to pay out that $100 because no one will be able prove his or her claim.

We do whatever we think will make us happy; that is, we act on the basis of our expectations. What materializes, however, may not necessarily correspond to our expectations. Utility, in other words, is an ex ante concept. Human beings are the only species with consciousness; we can extrapolate what may happen if we take a particular course of action. If I am at a gathering with my colleagues, for example, and there are a variety of delicious foods available, pizza among them, I will be tempted to take a few slices. However, after thinking about the consequences of eating unhealthy food, I may be prevented from doing so. Most likely, I will grab a couple of pieces and eat it anyway, although the joy of eating pizza may be constantly interrupted by worries about saturated fat, calories, and cholesterol. Thanks to our dichotomous brain, we are made not only to accept factual things, but we are also susceptible to falsehood. We do constantly think about the undesirable consequences of the choices that make us happy and seek strategies to hedge against the possible harmful consequences. Consequently, our countervailing brain power lures us to eat whatever might be bad for us, and thus we often acquiesce, for certain reasons, to accepting falsehood. Throughout history, this innocent human proclivity has often been exploited by some profit-seeking entrepreneurs who develop and sell non-useful, even harmful, products or promote erroneous ideas. For example, mental conflict (buy this car because its speed is macho and a symbol of your virility) is the reason why we may succumb to the temptation to drive above the speed limit on a highway knowing that it is illegal and may result in paying a hefty penalty. We often sacrifice our long term interests for short term gratification.

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Happiness often comes at a cost. We strive to achieve economic progress because we equate that with greater welfare. While this may be true to some extent, we should also consider the downside of unfettered economic growth. The social costs that are inflicted upon society as the consequence of production may be too high a price to pay. Consider the external costs of air pollution, environmental degradation, hazardous chemicals, damage to natural wildlife and human health as well as other consequences that flow from continual shallow and greed-based human choices. Such unmeasured, life-altering costs would greatly offset the additional happiness we might gain from material expansion. We usually do not deal with such costs effectively because those who gain from economic prosperity are not necessarily the same people who are harmed by its detrimental consequences.

Similarly, we work hard in the United States, spending many long hours working every day. The average work week in the U.S. is about 35 hours; however, this statistic has deceased because of the current economic downturn. In other words, we spend a great deal of time trying to improve our economic performance and lose our leisure and family time for the sake of producing more output. Going to work itself is often an unhappy necessity, if not the unhappiest of reoccurrences for most of us. For many of us, life is about doing things we don't necessarily like. So even if economic prosperity adds to our happiness, part of it will be offset by the unhappiness that results in the painstaking process of improving our material performance.

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Reza Varjavand (Ph.D., University of Oklahoma) is associate professor of economics and finance at the Graham School of management, Saint Xavier University, of Chicago. He has been an avid participant in many professional organizations and active in (more...)
 

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