Thursday, April 17, 2008

GDP and Happiness

Does happiness have anything to do with wealth (photo source: Gerard Boragay)

There is a fascinating discussion going on about the relationship between GDP and Happiness on the New York Times Freakonomics blog. I highly encourage everyone to follow it, particularly if you are interested in whether material wealth really increases happiness. So here's the basic gist:

Arguably the most important finding from the emerging economics of happiness has been the Easterlin Paradox.

What is this paradox? It is the juxtaposition of three observations:

1) Within a society, rich people tend to be much happier than poor people.
2) But, rich societies tend not to be happier than poor societies (or not by much).
3) As countries get richer, they do not get happier.

But then the author presents his own research and what his outcomes suggest. Apparently...

There is no Easterlin Paradox.

The facts about income and happiness turn out to be much simpler than first realized:

1) Rich people are happier than poor people.
2) Richer countries are happier than poorer countries.
3) As countries get richer, they tend to get happier.

Moreover, each of these facts seems to suggest a roughly similar relationship between income and happiness.

What explains these new findings? [read the rest...]
Of course he goes on to explain that most of it has to do with the flawed data set and resulting analysis.

Personally, I believe in some way that rich people are happier than poor people, but not for reasons that have anything to do with wealth. A significant number of the richest people in the world today (eg. Gates, Mittal, Buffett, Oprah, the google guys, etc) made their own wealth. Most of them came from average, if not lower than average circumstances and went on to make millions. The key to their wealth has been that they all LOVE their jobs. They all LOVE what they do. Their jobs got them wealth and they worked more (though I am pretty sure that if you took their wealth away or paid them nothing, they'd still do their jobs...the google guys are perfect examples). This has created a reinforcing loop of happiness and wealth. But more importantly, because they love what they do, they live more fulfilled lives and are happier. I can't say the same of the poor, who often take the jobs for the financial incentives or provide the best security. It doesn't matter how hard they work, but life continues to be an endlessly unfufilling struggle.

My point in this opinion piece is (and this goes with all the stuff about finding a job), do what you love (make enough to survive, but try to do what you love). Even in the worst case scenario, you might be poor...but a side of you will feel fulfilled, rich, and happy. This I say from multiple years of experience.

Take a lesson from the babe!

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