Happiness Is Not About What You Have

As proclaimed in the Easterlin Paradox more than 30 years ago, income data and individual surveys continue to show the people of wealthy nations are not any happier when their wealth increases, said Luis Rayo, associate professor of economics. Although people’s average wealth is three times higher than 30 years ago, their reported satisfaction with life remains flat and has fallen slightly in recent years, Rayo said during a keynote presentation at the Road to CFO Conference, sponsored by the student-led Financial Analysis and Treasury Group, at Hyatt Regency Chicago October 19.

“Would you be happy if your salary went up threefold?” he said. “Probably, but you would adapt. What if everybody’s salary went up threefold? Then you wouldn’t be so impressed with your own salary.”

To measure how happiness works in the brain, researchers measured the activity of dopamine neurons in the brains of chimpanzees, Rayo said. Dopamine activity is closely linked to motivation, happiness, and reward, he said. Initially, the chimps did not respond to a light turned on but increased their happiness when fed an apple, Rayo said. Eventually, their happiness increases with the light when they learn the apple will soon follow, he said.

“You keep repeating this experiment over and over,” Rayo said. “After a while, the chimp expects to get the light and the apple, so there is no change in his happiness. This is the wealthier chimp. Then there is a light but no apple and there is a drop in his happiness. What we learn here is that happiness is really about the deviations between what you get and what you expect to get. Happiness is not about what you have.”

For economists, happiness is a tool used by people’s genes to control their behavior and to motivate them to search for more, Rayo said. “In our model, happiness is – no surprise – the difference between success and expectations, and that difference is simply luck,” he said. “With income, our happiness first is relative to the income of our peers, which creates our social position. Our social position today is then relative to our social position yesterday. Happiness is the difference of these functions.”

Additional subtleties exist in the connection between income and happiness, Rayo said. For example, the higher a nation’s GDP per capita is, the more suicides it experiences, he said. Meanwhile, the more inequality a nation has among incomes, the less healthy its people are, Rayo said. “The U.S. is not a very healthy country, surprisingly,” he said. “For example, Costa Rica has a similar life expectancy but is about 10 times less wealthy.”

In his research of primates, biologist Robert Sapolsky shows their health depends on their position in their hierarchy, Rayo said. “This exact stuff happens in human beings,” he said. “If society likes you and you’re high ranking, you’re going to have a significantly lower level of stress than if you’re low in rank. Low-ranking individuals experience two to four times higher incidence of diseases, including diabetes, cardiovascular, respiratory, psychiatric, and others. If you live in a country where you see everybody else has much more income than you do, you’re chronically stressed.”

- Phil Rockrohr