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Happiness in the Balance

Economists chime in on finding path to contentment

Happiness in the Balance

In the age-old search for happiness, people have consulted clerics and philosophers, gurus and analysts. Few have thought to ask an economist.

But they probably have never met USC College economist Richard Easterlin. The University Professor doesn’t say money can’t buy you any happiness — but his research does indicate that the modern rat race doesn’t lead to happiness. The answer, he believes, is balance.

“The idea is to proportion how you allocate your time across different domains to maximize your happiness,” said Easterlin, a member of the National Academy of Sciences. “We often end up allocating too much time to pursuing money and not enough time to our family, health and other rewarding activities.”

"Well, it's not that you shouldn’t go after money and just pursue love. But don’t think that money is going to solve all your problems,” he said.

Part of the reason people may put more focus on accumulating wealth than fostering relationships and health is that they make life choices without factoring in the likelihood of adaptation — a phenomenon Easterlin described in his pioneering studies on the economics of happiness more than 30 years ago.

The economics of happiness investigates how life circumstances, personality, genetics and personal choices affect people’s sense of well-being. It incorporates theory and technique from sociology, demography and social psychology.

Despite recognition of the import of the research, the field has remained largely outside of mainstream scholarship. After all, the idea that money can’t buy happiness calls into question the implicit value of rising income, a long-held, if often unspoken, tenet of economics.

That might be changing: Judging by the enthusiasm at a recent conference held at USC, happiness research is gaining a foothold among the next generation of economists.

Easterlin, who joined the College faculty in 1982, has long been considered a maverick in his discipline. At the University of Pennsylvania in the late ’50s, he pursued interdisciplinary approaches that married economics to history and demography. This led to a body of influential research examining the baby boom and subsequent baby bust. He found that people make decisions about how many children to have — how many they could afford — based in part upon comparisons between their income and the standard of living they saw in their families when they were children.

In his oft-cited 1974 paper, “Does economic growth improve the human lot?,” Easterlin made a surprising find: while richer people are happier on average than people with less income, as a person’s income goes up he doesn’t grow any happier in a lasting sense.

Easterlin explained this counterintuitive result through the concept of adaptation — put simply, the more you get, the more you want. People tend to rate their financial status in comparison to their peers, lending scholarly weight to the familiar concept of “keeping up with the Joneses.” As a result, they consider their financial needs to perpetually outpace their resources.

His paper, now considered the seminal work in happiness economics, was rejected by the leading economics journal before it was published in a book, Nations and Households in Economic Growth.

Discouraged by the lukewarm response at the time, Easterlin returned his attention to large-scale studies of economics and fertility. His interest in the economics of happiness was rekindled in the early ’90s, just as new happiness research was coming from younger economists such as Andrew Oswald of the University of Warwick, whom Easterlin credits with leading a renaissance in the field.  

Easterlin now leads a large-scale study of well-being over the course of the life cycle. Recent results show that marriage and good health have longer-lasting effects on contentment than wealth.

On March 17, 2006, Easterlin’s peers and progeny gathered at Davidson Conference Center for the Economics of Happiness Symposium. He and Oswald coordinated the event, which was co-sponsored by USC College’s Institute for Economic Policy Research and the University of Warwick. Researchers from Harvard, Penn, the University of Chicago and other institutions from across North America and Europe took part.

The conference was an attempt to build a community. “Because this is a new field in economics and not widely accepted, the people working in this area do it primarily out of their particular interest and intellectual curiosity,” Easterlin said. “Oswald and I felt it would be good to bring together a number of these people, especially the younger ones who may feel there isn’t some community out there interested in the kind of thing they’re doing. We’re developing a network that’s going to maintain the impetus of the research.”

The media are paying attention. “The Happiness Formula,” a documentary TV series that aired in the U.K. beginning in May, referenced Oswald’s work assigning a theoretical money equivalent to various events that impact happiness. And the April 8 issue of the New York Times ran an article highlighting the USC symposium presentation by economist Claudia Senik of the Sorbonne. In her unpublished paper, “Is Man Doomed to Progress?,” Senik asserts that just anticipating the achievement of a financial goal bestows its own happiness.

“Throughout his career Dick Easterlin has produced groundbreaking research informed by his basic idealism and integrity,” said USC College Dean Joseph Aoun. “The College was thrilled to support the Economics of Happiness Symposium. Conversations such as this — scholars proposing alternatives to the accepted paradigms in their field, chipping away at the traditional walls between disciplines — form an essential part of our academic endeavor.”

When asked to discuss highlights of the symposium, Easterlin demurred, like a father asked to pick his favorite child: “I found all of them interesting in one way or the other. My view on where this field is going is, ‘Let a thousand flowers bloom.’”

Anke Zimmermann, a doctoral student working with Easterlin who appeared on a symposium panel, believes the field is here to stay. “The field is gaining momentum, and I think in a couple of years it won’t be questioned by the mainstream anymore. I’m his first student who is writing a dissertation on well-being, but I’m not going to be the last.”