It’s the Economy

Money Changes Everything

Credit...Illustration by Jasper Rietman

Depending on when you’re reading this column, economists have a pretty good guess as to what kind of mood you’re in. If it’s Sunday, you’re almost certainly happier than if you’re catching it on a Monday. Either way, there’s a good chance you’re in a lousy mood if it’s 7 a.m. (Sorry!) You’ll be happier around lunchtime, sadder at 2 p.m. but should perk up by 8 in the evening.

And economists will definitely have a theory about your happiness based on where you live. In collaboration with psychologists, a number of respected economists have spent much of the past decade or so mapping our levels of happiness across borders and daytime hours. Angus Deaton, an economist at Princeton University, is helping shape the movement to incorporate subjective measures of emotions into serious economic analysis. The goal is to use this new data to inform more traditional measures, like G.D.P. or the unemployment rate, and to influence government policy. Or at least that’s the idea.

Happiness quantification sounds a bit wishy-washy, sure, and through a series of carefully administered surveys across the globe, economists and psychologists have certainly confronted a fair number of sticky issues around how to measure, and even define, happiness. Still, some of the data make lots of anecdotal sense. Given that Nevada was ground zero for the housing bust, it’s not surprising that its citizens are less happy than Coloradans. Other findings, though, are more opaque. Why does western Long Island score several points higher on the happiness scale than most of Brooklyn? (Does being richer make you feel better than being cooler?) Why do Filipinos, who live in a relatively poor country, report such positive emotions?

Though still unrefined, happiness quantification has come quite a long way since 1974, when a University of Southern California economist named Richard Easterlin published an important paper that put the field on the map. His conclusion, known as the Easterlin paradox, stated that people do not become happier as they get richer. Around the same time, the Kingdom of Bhutan (population 738,000; average income, around $5,800) also began plans to measure what it called gross national happiness. These ideas might have had an impact, but nobody paid attention. “The general reaction of economists,” Easterlin told me, “was: ‘This is just subjective testimony that nobody puts any credit in.’ ”

Happiness studies became a hot discipline in the early 2000s, and France, Britain and other governments now conduct surveys of their own national levels of emotional well-being. It can be fairly instructive. Deaton, who advised the French government on its report, said, “The French are pretty miserable.” The United Kingdom’s Office of National Statistics reports only a slight happiness dip despite a deep recession. On the other hand, Bhutan’s happiness survey is so complex that I have no idea what the Bhutanese are feeling. Nonetheless, a United Nations committee has called upon the world’s governments to adopt happiness measures. A United States government panel is exploring the issue here.

As more data come in, however, many economists are becoming convinced of one significant change: the original Easterlin paradox doesn’t quite hold up. Broadly speaking, the data now indicate that as people get richer, they report getting happier too. Though it’s not quite that simple. Justin Wolfers, an economist at the University of Michigan who helps advise the U.S. government on happiness statistics, told me that poor people in poor countries are not unhappy simply because they don’t have wads of cash. They are more likely to have fewer choices, more children who die in childbirth and other grave problems. And while wealthier nations are generally happier, there is no evidence, Wolfers says, that an artist would be happier if she became a hedge-fund trader.

Happiness statistics may be most valuable in smaller, local discussions. Understanding how different sorts of programs affect the well-being of citizens would be enormously helpful to a mayor choosing between building a new bridge or offering a tax cut. I came across the very real role that money can play in happiness when I reported on Yvrose Jean Baptiste, a Haitian woman who lost all of her meager wealth in the 2010 earthquake. After the story was broadcast on NPR, listeners sent her nearly $4,000, which represents several years of wages to the average Haitian. When I visited Baptiste a few months later, I didn’t need any official statistic to tell me that her life had been transformed. She had paid for her aunt’s cancer treatments, sent her children to school and invested in a small market stall that provided a steadier income. She looked years younger.

Wolfers says that Baptiste’s story is typical of what happens when traditional agrarian societies give way to slightly less poor urban ones. As we ponder how to help the nearly three billion people who live on less than $2.50 per day, it is important to realize that seemingly small changes­ in income do lead to profound increases in happiness. In wealthier nations, of course, it takes a lot more money. Still, most rich countries have reported increases in happiness as they become richer.

There is one strange exception. The U.S. is nearly three times as rich today as it was in 1973, when Easterlin was collecting his data. According to nearly every survey, though, Americans are not at all happier than we were back then. This is explained, in part, by the fact that many Americans have not shared in the increased wealth. With the disappearance of pensions and the increased volatility of labor markets, many workers face more uncertainty than ever before.

But the decline in happiness may suggest a more deeply rooted issue. So much debate over government policy is based on economic statistics that come out of the market. But the goal of government is not just to maximize revenue. It’s also to make citizens better off. There is no standardized way for it to see how its decisions influence our well-being. What if government is spending money on things that don’t make us happy?

In this sense, happiness quantification is anything but wishy-washy. For much of what government does, Deaton says, it is far more rigorous to base decisions on whether they actually improve lives than on some other potentially misleading data. “It’s not like the economic data we’re collecting now is terrific,” Deaton told me. After all, nothing boosts G.D.P. like a debt-fueled housing bubble or a costly health care system. If happiness became a core part of government statistics, he says, we might figure out what it is Americans want. And then maybe, we could give it to them.