Thursday, August 19, 2010

More Happiness Musings

I have completed reading The Rational Optimist, which I talked about in a post earlier this week already.  Matt Ridley has lots of very interesting ideas ranging from sensible responses to global warming to the reasons that humankind managed to dominate the Earth.  The major recurring theme in the book is that trade is the single most dominant driver of civilization, scientific advance and economic growth.  Trade is defined by both exchanging of goods and ideas and after reading the whole book I find his position hard to refute, though perhaps he oversimplifies a little here and there.

The thing that it made me think about was the idea that economic freedom creates prosperity and happiness independently.  People are much happier in situations where they have the freedom to move around as they please, marry who they want and earn their living in the way they enjoy and these sorts of freedoms also bring economic and scientific growth.  If we look at governments in the past we see a very stark trend that those that allowed their citizens substantial freedom in their lives and protected their rights, in particular property rights, prosperity and innovation followed.  The reverse is true of oppressive regimes that restrict their citizens freedoms and do not respect their individual rights - in these cases little in the way of economic growth or scientific advance followed.

The trick here is that we would like to know how much economic prosperity affects people's happiness.  Rich countries are consistently happier but rich countries are also usually democratic and the citizens of those countries have extensive rights that are usually respected.  Even if democracy, free thought and an open market did not create wealth I would expect that any country sporting these institutions would be happier than one that does not by a significant margin.  The other trick is that happy people become richer.  If you treat mental disorders, drug addiction and other causes of unhappiness in society you create opportunities for those people to take part in the economy productively and become richer.  Also, those that are happy due to other factors are naturally predisposed to becoming wealthy.  People with supportive networks of family and friends, good money handling and social skills and a comfortable upbringing have a massive advantage in the job market and also are going to be much happier than those without.  They are going to be both happy and relatively wealthy even if no correlation existed.  The same applies to achieving a state of flow - doing a hard job that suits one's skills is rewarding in both smiles and cash.

None of this proves that happiness and wealth are not correlated above the middle class, and it also doesn't prove the reverse.  Unfortunately for our understanding this topic is incredibly complex and answers are extremely difficult to tease out of the data we have.  Fortunately it isn't necessary to determine that answer to arrive at good public policy since there still are many people that don't have enough money to get themselves above the theoretical happy minimum in Canada, never mind in Africa and elsewhere.  Economic prosperity will definitely allow us to increase the happiness of our own country and improve the lives of people elsewhere in the general sense, regardless of whether or not it actually makes sense from an individual perspective to pursue wealth as a means to that end.


  1. I figure happiness is governed by your ability to interact with other people (friends). If the income you have allows you to participate in the activities you and your friends enjoy, you're happy. If your income restricts you from participating in the activities of your friends you won't be happy. I see people on the street who hang out together all the time. Seemingly enjoying each others company, telling jokes etc. Could money improve their health, diet, well-being? Most likely but would they be happier? Hard to say as happiness is a relative term. In high school I was damned happy to get together with my buddies and play table top D&D or MTG or board games (all low cost hobbies). I wouldn't say I was any less happy than the rich kids in school who went to Duluth for the weekend with their friends or hit up Mexico for March break.

    So in the end, more money will only increase your happiness if it allows you to participate in more of the activities your chosen friends do. If you have too much money it restricts your friends from joining you in select activities and reduces your happiness.

    My thoughts :)

  2. I must say, I never thought of Magic as being a low cost hobby when I was in high school.

  3. I ended up posting a profit on all my time playing Magic and buying cards due to tournament winnings, so it is entirely possible to play Magic very low cost. Not *everyone* can do this mind you, but the best players in an area can!

  4. Including all the hidden costs involved such as sleeves, travel, etc?

  5. Good question. I counted all tournament entry fees and actual card purchases in my calculation and I made a little over a grand and still have a bunch of cards. I probably spent about 50$ on accessories, which doesn't put a dent in the profit, but I did travel a fair number of times. My travel was always by car into a shared motel room though so it wasn't exorbitantly expensive. I may well end up negative some money if you count all my trip costs but I don't find that too reasonable of a comparison. People who play golf on a tropical vacation don't count their flights as the cost of golf and I don't count a road trip with friends where I play Magic as a direct cost of Magic. Ymmv on this, but counting all direct costs of Magic and not travel I profited a bunch of money and a bunch of cards.

  6. You suggest a connection between being happy and making money. Is that from a study? I would tend to expect the opposite. Being very happy would reduce your interest in making more money, which would reduce your likelihood of doing so. Unhappy people need something, and whatever that something is, money can easily end up being a proxy for it, if not a direct way to acquire it.

    Treating mental illnesses and drug addiction might make people happier, but I don't think that's our primary goal in doing it, and I don't think that the happiness is then responsible for the subsequent increase in earning potential. Many mental illnesses very directly detract from earning potential, so even if removing them had no effect on happiness it would still improve earnings.

    You also mention "good money handling and social skills" as though money handling skills and social skills were related or connected. Both probably contribute to earning potential, but the former has nothing to do with being happy. I don't think there is any reason to suspect that people who have good money handling skills are more or less happy because of it, except insofar as those skills affect how much money they have.

  7. I suggest that social skills increase happiness because they allow for a greater and smoother social network which is known to increase happiness. I don't have a study that proves that people with better social skills have more friends but I certainly feel it is true. Money handling skills are a sure fire way to both happiness and being rich - debt creates unhappiness and those who effectively manage their income to stay out of debt and ahead of the bills are going to be both happy and rich because of it. The trick to these statements lies in the definition of wealthy of course because wealthy often looks at incomes rather than debt loads and you can have a low income but be very secure financially or a high income and be plagued by debt.

    I cannot prove that being happy in all professions positively correlates with financial success, but I can tell you that in the profession I am most experienced in that that relationship holds. Unhappy salespeople make drastically less money than happy ones. Happy workers are going to tend to get more done and be more popular so I would certainly expect promotions and raises to follow. These are only my expectations and narrow experiences though, and doing a study to prove these relationships would be a daunting task.

  8. I know that social skills certainly increase happiness. I think money management skills increasing happiness and wealth is an interesting thing, because again we are talking about two different kinds of wealth.

    The "I've got food" kind of wealth *should* be something that someone making $60k a year doesn't worry about, but if you crush yourself under massive debt buying a lifestyle you can't afford then suddenly your desire to have what you want starts threatening what you need. This is something we haven't discussed yet in this happiness/wealth discussion: the fact that no matter how much money you have, you can still be made unhappy by not having enough to meet your basic needs.

    On the correlation between happiness and wealth, while I can see how a very negative outlook can have a negative impact on earnings, I was looking at it from the other side. I think that being generally satisfied with what you have and not feeling that you need more should be negatively correlated with wealth. Actually trying for promotions, higher paying jobs, etc., would presumably go in favour of getting them. Happiness and satisfaction with what you have seem to be highly correlated ideas.

    Then again, maybe people who are never happy with what they have are more often like the loser best guy-friend of the hot girl from a highschool drama. Wanting something really, really badly can end up being a barrier to getting it.