AMMAN, 20 December 2004 — As 2004 comes to a close, one could safely argue that it has been another good year for the countries of the region with real GDP growth estimated at an average at around 10 percent. People should be better off today than at the beginning of the year, at least in terms of their material well being. The strong performance of the region’s stock markets and the surge in real estate prices increased the number of Arab millionaires. Some of the wealth has trickled down to people in lower income brackets and the feel good effect is spreading. The question to ask is: Are we happier?
One would not expect to find the answer in supply and demand curves, nevertheless economics cannot be ruled out as being irrelevant in this respect. Economics of happiness is becoming a hot topic in the media and is being studied and analyzed by a cross section of social scientists including economists. While economic growth continues to improve people’s income and standard of living, there isn’t enough evidence to suggest that it is making them happier.
To say that money does not buy happiness is not exactly new, as those who moved up on the income ladder would attest. But to suggest that beyond a certain income level, societies do not necessarily get happier as they become richer, has strong policy implication that is worth analyzing. So far, governments have been using GDP (gross domestic product) and GDP growth as a proxy for well being. Yet, if the link between GDP and happiness is vague at best, one of the key objectives of government policy of attaining high real growth in GDP would be a necessary but not a sufficient condition to deliver a corresponding improvement in people’s sense of well being. The role of the government should therefore include the promotion of conditions in which happiness can flourish.
Economic studies on happiness show that while people on very low income become significantly happier when their earnings rise, however, once they reach a quite modest level of income, further increases in earnings bring little extra happiness. One explanation is “habituation” whereby people adjust quickly to changes in living standards. Although improvements and material well being make them happier for a while, the effect gradually fades away. For instance, 30 years ago central heating was considered a luxury, and so was the mobile phone 10 years ago, today these are viewed as essentials. Getting a salary increase, moving to a new apartment, buying a new car are examples of changing circumstances that lead to temporary improvement in people’s happiness. But they soon become part of our daily lives. This is why counting one’s blessing is always recommended inorder to prevent them from becoming part of the “norm”.
A second and more important reason why more money does not automatically make every body happier is that people tend to compare their situation with that of others. It seems that they will be happy with less, as long as they were better off than others. Several studies confirm that people are often more concerned about their relative income to others than about their absolute income.
Pleasure derived from attaining a higher standard of living can vanish quickly when people learn that others in their community or society have done better. Because of the improvement in communication and means of transportation, the poor are now able to witness first hand the extravagance of the few at the top and envy them for what they have. The unhappiness that one person’s wealth can cause to others is a form of “economic pollution” that has not yet been properly addressed in economic policy.
There is a branch of psychology devoted to happiness and wellbeing. One of its gurus in Martin Seligman, a professor at the University of Pennsylvania, who suggests three ways to find happiness i) the pleasant life, which consists of experiencing as many of life’s pleasures as possible including getting educated, being happily married, living in a place you don’t want to move out of, having close friends, going to restaurants and movie theaters, etc., ii) deeper contentment, which lies in getting absorbed in your work or in things you do best and losing yourself in the process and iii) the meaningful life, where engaging with a cause or an institution supplies a sense of belonging to something much bigger than you are.
What can the leaders of the public and private sectors do to promote happiness? The answer is not necessarily more vacations, shorter working hours and across the board increase in salaries. In Germany, a 35-hour-work week and a host of positive social indicators did not reduce the high rate of depression. Perhaps the alternative lies in recrafting work so that more people start enjoying what they are doing and see their jobs as part of something larger and more rewarding.
Unemployment, poverty and the feeling of insecurity are major sources of unhappiness in our part of the world that need to be addressed. People in the lower to middle income brackets should not feel they are shouldering a heavier tax burden than the ones in the higher income brackets. If happiness is more important than money then government bodies and organizations of civil society should do all they can to communicate to the population at large ways and means to attain happiness. This would include providing people with safety and security, raising the minimum wage, generating productive employment opportunities, allowing more freedom of expression and putting emphasis on love and belonging including the need to feel accepted and appreciated by the community one is living in.
(Henry T. Azzam is chief executive officer at Jordinvest.)