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  1. 1. Money Doesn't Make People Happy Tim Harford 02.14.06, 12:00 PM ET "The hippies," claimed economist Andrew Oswald recently, “is having their quiet revenge." Oswald, a professor at Warwick University in England, is one of a growing number of economists fascinated by the question of what makes us happy. In a recent public lecture he announced, "Once a country has filled its larders, there is no point in that nation becoming richer." That, at least, should bring a smile to a few faces. Economists have suddenly realized that money can't buy you happiness? This is like the squarest kid at school suddenly discovering beer, girls and music in his 30s. The rest of the world had worked it out already. One of the things that excites economists like Oswald is the ability to compare data on wealth, education and marital status with the results of happiness surveys. In these surveys, people are asked such questions as "Taking all things together, would you say you are very happy, quite happy, not very happy, not at all happy?" Economists have been trying to make sense of the results across individuals, across countries and across the years. The headline: Once a country gets fairly rich (though much poorer than the United States), further economic growth does not seem to make its citizens any happier. So, money does not buy happiness. Or does it? "In every society, at any point in time, richer people are happier," points out Will Wilkinson, a policy analyst at the Cato Institute in Washington D.C., who runs a blog on happiness research and public policy. "But that in itself doesn't tell you much about the relationship between money and happiness." Richer people, after all, tend to have high-status jobs. They tend to have more control over their lives at work--why pay someone six figures if you're not going to ask her to use her own judgment? They also have higher expectations and will be comparing themselves to wealthier people. It's hard to say what is really driving the results: money, status or expectations. Perhaps each society's richer people are also happier because happiness comes not from absolute wealth but from relative wealth--recall H.L. Mencken's quip that "a wealthy man is one who earns $100 a year more than his wife's sister's husband." A more skeptical view is that while it means something to compare my happiness with that of the guy asking me for change on the street, it means nothing to compare my feelings today to those of my grandfather in 1950--or those of a Portuguese shopkeeper or a Japanese salaryman. Wilkinson and economists like Oswald and his compatriot Lord Layard are thinking about the policy implications of happiness research. My own interest is a little different: Can the new breed of happiness economists offer us any tips for happier living?
  2. 2. Much of the advice is pretty slippery. For instance, married people are much happier than single people. So perhaps you should get married? (Even better if your fiancée's sister's husband is unemployed.) Not so fast. More sophisticated surveys show that the causation runs both ways: Happy people tend to find spouses, while those suffering from depression don't find it so easy. And--not surprisingly--some people do brilliantly out of marriage, and others are utterly miserable. As an economist, I'm afraid I have no idea whether you should propose to that cute girl you've been seeing. (You may or may not take comfort in Oswald's finding that you can always get out of marriage: People are happier immediately after a divorce than immediately before.) Oswald also suggests self-employment, if you can pull it off without losing out financially. "Everything associated with self-employment--independence, autonomy--is also associated with being happy." Both Oswald and Richard Layard argue that relationships are more important than money--and that includes professional relationships. "I've come to believe in the old- fashioned view that one should be tender in one's dealings with colleagues," Lord Layard told me in an interview. And what else? "Think about what you have rather than what you don't have, both materially and in your relationships and your personal strengths. To use the language of economics, don't try to rectify things that aren't your comparative advantage." This is spiritual thinking from an economist, but Oswald goes one better. If you're depressed, why not just wait? "There's a kind of J-curve describing happiness over time. Your late 30s are the most unhappy period of your life, but then the older you get the happier you are. Life really does begin again at 40." I think the most useful research, though, is by an honorary economist: Danny Kahneman, the only psychologist ever to win the Nobel Prize in economics. He asked nearly 1,000 working women in Texas to reflect on their previous day, list the different episodes in it, what they were doing and how they were feeling. Some results are predictable enough: Work is miserable, and commuting is worse. Others are not so obvious. For instance, praying is fun, but looking after the kids is not. Spending time with your friends is one of the most enjoyable things you can do, but spending time with your spouse is merely OK. In fact, parents or other relatives turn out to make more enjoyable company than the supposed love of your life. What is perfectly clear, though, is that socializing with anyone except your boss makes you feel good. Sex is best of all. This is handy advice at last. But what if you are having sex with your boss? Whereof economists cannot speak, we must remain silent. Tim Harford, a Financial Times columnist, is the author of The Undercover Economist.
  3. 3. The story of the rich man Once upon a time, there was a rich man who decided to give away his wealth. (fantasy…).When his friends, very wealthy people - rich people know only rich people- knew about his crazy decision, they flocked to his home asking for a piece of the pie. The richest man on earth, more than a 100 billion dollar worth, was the first one there. He was given what he asked for, a few billions…Then came the second richest man for another few billions, then the third and so on…After a handful of our rich idols were done, the rich, I mean poor man's wealth was reduced to a mere 97 cents. Very annoyed, he then decided to give up his remaining wealth to as many people as possible. So he drove by to the poorest neighborhood in town, giving a whole cent to the first 97 homeless people he found. As a matter of fact, the rich man's wealth was almost totally "sucked" by other rich people… And there was another rich man, more prudent, and …fond of quantum theory. Just like his generous fellow, he chose to give up his wealth. However, he added a rule as to the distribution of his wealth: any recipient would only be allowed to receive whole multiples of his or her personal wealth. Whoever owns 100, can only receive 100, 200, 300 or any multiple of 100.Under no circumstances can he get a fraction of 100. So when the richest man on earth, still thirsty of more wealth, knocked at the wise man's door and asked for a few billions, his demand was rejected as he couldn't comply with the new quantum rule: according to this rule, the richest man on earth can only receive a multiple of his 100 billion dollar wealth. Since the generous man doesn't have that much funds, the richest man on earth was sent home without an extra penny. (
  4. 4. People invariably believe that money can make them happy -- and rich people usually do report being happier than poor people do. But if this is the case, shouldn't wealthy people spend a lot more time doing enjoyable things than poor people? Nobel Prize-winning behavioral economist Daniel Kahneman has found, however, that being wealthy is often a powerful predictor that people spend less time doing pleasurable things, and more time doing compulsory things and feeling stressed. People who make less than $20,000 a year, for example, told Kahneman and his colleagues that they spend more than a third of their time in passive leisure -- watching television, for example. Those making more than $100,000 spent less than one-fifth of their time in this way -- putting their legs up and relaxing. Rich people spent much more time commuting and engaging in activities that were required as opposed to optional. The richest people spent nearly twice as much time as the poorest people in leisure activities that were active, structured and often stressful -- shopping, child care and exercise. Kahneman and his colleagues argued that many people mistakenly allocate enormous amounts of their time and psychological focus to getting rich because of a mental illusion: When they think about what it would mean to be wealthy, they think about how enjoyable it would be to watch a flat-screen TV set, play lots of sports or get a lot of pampering -- our stereotypical beliefs of how the rich spend their time. "In reality," Kahneman and his colleagues wrote in a paper they published in the journal Science, "they should think of spending a lot more time working and commuting and a lot less time engaged in passive leisure." (