Thursday, January 20, 2011

The Economics of Happiness

Yesterday I turned on the radio and listened to a song. One of the lines was "when you don't know when enough is enough you'll lose everything". I was surprised. It was a deja vu. I have been thinking about this intensively over the last week and had some discussions with friends on this very topic. This is ancient wisdom. Have a look at these quotes:
  • "The secret to happiness is being satisfied with enough" Thomas Aquinas
  • "When there is no desire, all things are at peace" Lao Tse
  • "The secret of happiness is not found in seeking more, but in the capacity to enjoy less." Socrates
  • "Happiness is knowing when 'enough is enough.'" Thich Nhat Hanh, Vietnamese Buddhist monk
  • "Rather than make money to live the way you want, figure out how to live the way you want without money." One of my friends
A handful of economists started studying "the economy of happiness". The first book under this title was published in 1906. That's more than a century ago. Very recently a documentary was released under the same title. Wikipedia has an article on "Happiness Economics". Bhutan was probably the first country in the 20th century to introduce a Gross National Happiness index to contrast the standard GNP. Apparently since 1999 they are measure this quantitatively. Having it on a public agenda might have helped bring Bhutan to be considered the 8th most happy nation on our planet. Now other countries have picked up on this (e.g. Thailand) and others are currently discussing its introduction (UK, France).

Mark Anielski has written a more recent book with the title "The Economics of Happiness: Building Genuine Wealth". He uses a stylized 5-petal flower to visualize 5 factors of happiness or genuine wealth. For more details on what he means by that listen to his 80-min talk.

But back to the core: we need to know when enough is enough. A financial person would put it: we need to know when it is better to reduce spending instead of increasing income (in order to become happier). My friend calls it the dual problem. From a mathematical economics standpoint either approach from the dual sides should lead to a solution. From an isolated viewpoint one can balance a budget by either earning more or spending less. From a more holistic approach taking resource depletion and natural balances into account, it seems obvious that if spending or using less can lead to the same goal (of a balanced budget and a happy life) then this seems not only the preferred but the only true solution to the problem.

Socially we are far behind or far away from accepting this truth. The materially rich are admired, the ones who earn a lot of money are called successful, but the materialistically or monetary humble ones are disrespectfully called cheapskates. It is time to shift our attitude. Why not call the materially rich ones "spendthrifts" and the frugal ones "resource efficient"?

My friend also views the quote "A penny saved is a penny earned" by Ben Franklin equivalent to the above ones. I guess a penny saved can lead to happiness. This brings us (once again) to Voluntary Simplicity and Simple Living. Voluntary simplicity can work beyond the individual. The one fact that all happiness researchers agree is that happiness is relative. In other words, a poor amongst poor is as happy as a rich amongst the rich. Furthermore, a poor amongst poor is happier than a rich amongst the even more rich. If a whole nation or the whole of mankind were to make a step towards a simpler life we would all stay at least equally happy, if not become more happy due to the same factors that individuals attain happiness via simplicity (more spare time, less stress, less worries, less dependencies, more social time, more social ties, etc.).

The reverse is not an option. Voluntary wastefulness as many practice it today will lead us all into ruin, either socially or ecologically. We desperately need an attitude shift, we need to first recognize and accept, then embrace and cheer that less can be more satisfying.

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