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Money and Happiness

Are we on a hedonic treadmill? Does it matter?

I recently read a book called Measuring Happiness: The Economics of Well-being, by economists Joachim Weimann, Andreas Knabe and Ronnie Schöb. The book gives a useful introduction and overview of the past few decades of research on self-assessed happiness by economists and psychologists. A major focus is the so-called Easterlin paradox. In 1974, economist Richard Easterlin reported that although at a given point in time, higher income is associated with greater self-reported life satisfaction or happiness, happiness thus measured fails to rise over time among those at the same position in a country’s relative distribution of income. For example, while the standard of living had (as of then) risen dramatically over recent decades in Japan, Easterlin found that people in a given decile of the income distribution in Japan reported no greater happiness at their new higher incomes than at their previously lower ones. (Note that they were not being asked to compare their happiness now vs. then or being asked by the interviewer to think about their standard of living now vs. then, they were only being asked at each point in time to assess their overall current life satisfaction.)

iStock/Used with Permission
Source: iStock/Used with Permission

Weimann et al. are concerned about a potentially radical and much-discussed implication of the Easterlin paradox, namely that we’re all trying to get ahead on a hedonic treadmill, thinking that by raising our levels of income and consumption we’ll make ourselves happier, but in fact ending up no better off unless we improve our positions relative to those of other people. Some, they say, have proposed government nudges to discourage excessive competition for income, on grounds that most of us could be happier spending more time with our families and engaging in more leisure pursuits, and that the economic rat race to which the hedonic treadmill is linked also needs to be slowed down to give the planet’s environment a fighting chance of sustaining our descendants over the longer run.

The authors counter this narrative by drawing on several lines of research and argumentation. First, they report that more recent studies using what can be argued to be more representative samples from Gallup surveys conducted in large numbers of countries, find a stronger linkage between happiness and income than do those on which Easterlin’s original and subsequent findings have been based. Second, they point out that length of life, which has increased considerably in recent generations, is unjustifiably ignored by paradox proponents. If we care about the sum total of happiness that people experience in a lifetime, then even those whose average happiness level is static are experiencing greater happiness today than did their grandparents who lived twenty fewer years.

Finally, the authors venture into the broader domain of economic and social philosophy where they argue that competition for relative position is a good thing in that it’s driven technological progress and improvements in living standards over the long run, and will in all likelihood continue to do so if not hampered by the sorts of policies extreme proponents of the Easterlin paradox have proposed.

This and other material on happiness research covered by these authors is certainly interesting. But on the big question of whether there is or isn’t a hedonic treadmill problem worthy of serious philosophical attention, I find their answers unsatisfyingly conventional, i.e. just the sort of argument I would have expected from traditional economists of the era in which Easterlin first wrote. In my own view, there’s long been a compelling case to be made that one of the drawbacks of modern market economies is that they have a built-in mechanism for churning out psychological prompts to produce and consume, but no countervailing mechanism to balance them. In my book The Good, The Bad and The Economy, I put it this way: “the central role of the profit motive, combined with the intimate link of profit to selling things, arguably contributes to a culture in which the real gain in human well-being that might have come with higher productivity and better health has fallen well short of its potential. Rather than be freed of material impediments to a richer life in the present, millions keep running on a treadmill with eyes glued to the brighter displays of opulence that are always on the horizon.”

Of course, this doesn’t mean that capitalism mercilessly chokes off every second thought that arises from our natural human thirst for something more than a Coke or a good cup of coffee. You can fill a bookcase with how-to books on meditation, spirituality, the case for simplifying one’s life, and even flat out anti-consumerist messages—which means that there are enough folks willing to pay for these things, and no censorship of them by The Market Economy, Incorporated. But that’s no reason to stop debating whether there are things we might want to do collectively to raise the priority assigned to life satisfaction, to promoting pro-social values, and to enhancing other aspects of human flourishing. Considered in this broader perspective, economics of happiness research can help to inform the discussion, but it’s unlikely in and of itself to offer fully adequate answers.

More from Louis Putterman Ph.D.
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