The Price of Everything (12 page)

Bliss doesn’t last either. German women become progressively happier in the two years in which their relationship moves from courtship to marriage. Yet after peaking the year of their wedding, happiness drifts back down over the next two years to close to where it was before. The same thing seems to happen to people who strike it rich. Studies have found that the burst of euphoria people experience when they win the lottery fades relatively quickly, even if the prize is in the millions. Within six months of having won, the happiness reported by big winners is back down around where it was before.

In the 1970s, the economist Richard Easterlin of the University of Southern California made what is probably the most intriguing finding in the history of the economics of happiness. Poring through twenty-five years of surveys about happiness, he concluded that despite stellar economic growth, Americans were not significantly happier than they had been at the end of World War II.

Adaptation would explain this trend. Easterlin suggested another complementary dynamic: happiness may not depend on our absolute level of well-being but on how it compares with the well-being of those around us. We feel happy when we are better off than our neighbors.

Other economists since then have found similar examples of the relative nature of happiness. People feel less happy when their neighbors have more money. Roughly speaking, losing $1,000 produces the same sort of dissatisfaction as seeing a neighbor gain $1,000. Suicide rates are higher than average in areas where there is a large gap between the highest earners and average people. Many economists have accepted the notion that money might buy enduring happiness for very poor people, for whom a rise in income could drastically change their living conditions. But beyond a certain satiation threshold it would be pointless to strive for more. The rich may be happier than the poor. But getting richer wouldn’t make them happier, at least not for long, because they would soon adapt to their new life one rung up the income ladder and start comparing themselves with richer people.

Adaptation could be a useful trait. Economists Gary Becker and Luis Rayo argue that the ephemeral, context-dependent nature of happiness makes sense in evolutionary terms. If progress boosts our happiness only briefly, we will be motivated to constantly improve. The desire to keep up with the neighbors would work in much the same way. The relentless drive to improve would increase our chances of survival. As Adam Smith put it 250 years ago, the idea that we can achieve happiness amounts to a “deception, which rouses and keeps in continual motion the industry of mankind.”

But surely we would have caught onto the con by now? If Easterlin was right, economic growth would be a glum proposition. If everybody’s income rose equally, people’s relative position wouldn’t change. If growth benefited some more than others, the increase in happiness among the winners would balance out the loss of happiness among the losers in a zero-sum game. Adaptation proposes a world with even less hope, running pointlessly on our treadmill of happiness, rooted to the same place. The founding fathers of the United States included the pursuit of happiness as one of the inalienable rights they thought its citizens should have. But if we truly adapt to everything, what point is there in striving to be happy?

Some psychologists have even suggested happiness is hardwired, determined not by changes in our environment but by our individual genetic makeup. And there seems to be some evidence that our genes do play a part. The Minnesota Twin Registry has followed thousands of twins born between 1936 and 1955. Researchers have found that changes in happiness are very highly correlated among identical twins, who share all their genetic material. Regardless of whether they grew up together or apart, the happiness of one twin is more closely related to that of the other than to his own level of education or his wealth. By contrast, the correlation disappears for fraternal twins—who come from two different eggs.

But if our happiness is in our genes, we will have to answer a question deeper than Bobby Kennedy’s: what is the point of striving for anything if nothing will improve our sense of well-being? That would turn economics on its head. A few years ago, Easterlin wrote an essay titled “Feeding the Illusion of Growth and Happiness” in which he starkly laid out the conclusion of a lifetime of happiness studies: they “undermine the view that a focus on economic growth is in the best interests of society.” In fact, the proposition that we are on a treadmill of happiness undermines the belief that society can improve at all.

But we shouldn’t despair just yet. The treadmill of happiness is a metaphor too far. And Easterlin overstates his case. The evidence arrayed against the proposition that progress—economic or otherwise—can make us consistently happier is weaker than it appears. Economic progress can still do a lot for humankind.

American happiness remains peculiarly impervious to progress. Between 1946 and 1991 income per capita in the United States rose by a factor of 2.5—ownership of consumer durables from TV sets to cars soared, educational attainment jumped, and life expectancy at birth climbed. Still, Americans’ average happiness measured by surveys fell slightly. The United States was one of only four industrialized countries—alongside Hungary, Portugal, and Canada—where life satisfaction fell between 2000 and 2006.

But outside the United States, surveys of life satisfaction find that gains in income almost always led to gains in happiness. Surveys in fifty-two countries over the past quarter century or so found that happiness increased in forty-five and declined in only seven. Among the poorer countries—India, Ireland, Mexico, Puerto Rico, and South Korea—it increased a lot. With the odd exception of Belgium, all nine countries that were members of the European Community in 1973 have reported rising happiness alongside economic growth since then.

These data contradict the proposition that we are stuck, recalibrating our aspirations with every step we take, falling right back to where we were. They suggest that if indeed we do adapt to improvements in income, adaptation does not swallow all our gains. If we get a kick out of staying ahead of the neighbors, we also enjoy the improvements to life that money can buy.

If $100 provides much more happiness in Burundi than in the United States, that reflects the fact that $100 is a much bigger deal when your annual income is less than $400 than when it is more than a hundred times that much. But economic development seems to improve the satisfaction with life in rich countries too. In fact, the lesson to take from Easterlin’s research is not that economic growth doesn’t provide further happiness past a certain point of development. It does. What happens is that having a bigger income matters less when our income is already big. This dynamic is well understood by economists. It is called diminishing returns. Other scarce endowments, such as free time or an unpolluted environment, are also important for our well-being. As money becomes relatively less important they start to matter more. When we sacrifice some of these endowments to achieve economic prosperity, the net extra happiness must balance the money gained against all that is spent to gain it.

Americans are richer than Europeans. Gross domestic product per head in the United States averages $47,700, more than one-third greater than in France or Germany. Yet the average American recorded a 2.2 happiness level on a scale of one to three, according to the General Social Survey, almost identical to Europe’s ranking, according to the Eurobarometer polls, of 2.9 on a scale of one to four.

Several things probably account for Americans’ stagnant satisfaction. The first is the lopsided nature of American income growth. From 1972 to 2005, household income grew less than 20 percent for those in the poorer half of the population. It grew 59 percent for the richest fifth. Happiness followed the trend: it increased slightly for the top 40 percent of earners but declined for everybody else. If today the United States has the most unequal distribution of happiness among the richer members of the Organization for Economic Cooperation and Development (OECD), it is likely because it also has the most unequal distribution of income.

But there are other potential explanations. The notion that money doesn’t improve our perceived well-being may be due to conceptual confusion about what such improvement means. Using the survey responses of some 450,000 Americans, Daniel Kahneman and Angus Deaton of Princeton found that people’s “emotional wellbeing”—measured by their reporting of recent feelings such as joy or sadness—did in fact stop improving after income hit a threshold of about $75,000 a year. But people’s sense of satisfaction with their life increased continuosly with income, with no evidence of satiation at all.

Money makes us feel better about our lives, but so does having free time. Americans have sacrificed enormous amounts of time to achieve their unparalleled economic prosperity. Easterlin’s paradoxical finding that Americans’ growing wealth hasn’t made us any happier is, in reality, proof that the time we spend earning money is erasing the happiness we get out of counting and spending it.

Researchers studying a group of one thousand Texan women who kept detailed diaries about what they were doing with their time and how they felt about it found that the women’s happiest activity was sex, followed by socializing after work and relaxing. The most undesirable tasks were commuting and working. Unfortunately for the women, they spent only about three hours and forty minutes doing their favorite things, and nearly nine hours on the unpleasant stuff.

No other workers in the industrial world work as much as Americans. Every country in the OECD except the United States mandates a combination of paid leave and paid public holidays. Portuguese workers get a total of thirty-five days off a year. Even the famously workaholic Japanese get ten. In the United States, by contrast, workers have no mandatory paid days off. And Americans get fewer vacations too. While the time devoted to work has declined in most industrial countries, in the United States it has remained flat over the past thirty years. Full-time American workers toil forty-six weeks a year, on average. That’s five more weeks than in Spain. Four decades ago Japanese workers logged 350 more hours at work per year than Americans. By 2006, Americans worked more than the Japanese.

This work has produced a lot of growth. Between 1975 and 1997 the nation’s GDP per head grew almost by half. Yet perhaps what went wrong is that all the happiness gained by Americans from the extra income was consumed by the unhappiness of having to work seventy-six more hours a year to get it. Compare this with the situation in France. The French economy has grown a little more slowly. But the French worked 260 fewer hours in 1997 than in 1975. Comparing the happiness boost provided by money with that provided by free time, researchers estimated that the United States would have had to grow almost three times as fast as it did to compensate Americans for their extra work and provide them as much happiness as the French got.

The trade-off changes as we become richer. The value of our scarce free time increases, while the things money can buy become less important the more we have. That’s why people in rich countries usually work less than people in less developed ones. Koreans enjoy about 650 more hours of leisure a year than Mexicans, but about 400 fewer leisure hours than Belgians. But the trade-off itself generates anxiety. Because the more our incomes rise, the more money we forgo when we spend time on nonproductive endeavors. The tension between time and money peaks when we make the most money of all.

The curve of happiness over the life cycle looks like a U, declining steadily until middle age and rising again. American men are unhappiest in their early fifties and Europeans of both sexes in their late forties. Mexicans hit their happiness minimum at about age forty-one. Middle age can be a disappointing inflection point. It’s when we finally admit our limitations and shelve the long-held plans to become a pop star, strike it rich, travel the world, and live forever. It is the point in life when we hit the peak of our careers and make the most money. But it is also the point at which we enjoy the least free time. The average middle-aged American man sleeps 8.3 hours a night, down from 9.8 hours in our late teens and early twenties.

Information technologies, portrayed as revolutionary tools to improve our lives, are the shackles of the contemporary economy. At the height of the dot-com bubble of the 1990s, Stephen Roach, the chief economist at investment bank Morgan Stanley Dean Witter, wrote a scathing critique of government statistics that purported to show spectacular increases in the service sector’s labor productivity. How could it be, he wondered, that service professionals could expand their output per hour so readily when their output consisted mainly of ideas?

He concluded that the so-called productivity boom brought on by computers was a mirage. What was happening was that technology made it easier for workers to work longer hours. Laptops, cell phones, and other appliances allowed them to take their work with them everywhere they went. “The dirty little secret of the information age is that an increasingly large slice of work goes on outside the official work hours the government recognizes,” Roach wrote. The time we now devote to work on our gizmos we used to devote to other activities that were frequently more rewarding. As recently as 1985, Americans spent an average of two hours and twenty-nine minutes a day preparing food, eating it, and cleaning up. By 2003, the time invested in meals had fallen to one hour and fifty minutes.