Why Happiness Hasn't Increased

Despite vast increases in income per capita, longer holidays, better health care, and dramatic technological increases over the past fifty years, the overall happiness of people in many countries has not increased much, if at all. Table 1, below, shows that the percentages of people claiming to be very happy, pretty happy, and not too happy have barely changed at all from 1975 to 1996. Richard Layard points out several reasons as to why this is the case.

Income and Happiness

Income plays a vital role in determining the happiness of people. Studies show that 41% of people in the top income quarter consider themselves very happy, while only 26% in the bottom income quarter feel the same. As Table 1 indicates, the happiness of people in 1996 is essentially the same as in 1975. This is shown even though per capita income has steadily increased since over that time period. Table 2 shows that in the United States, France, Japan, and the United Kingdom, annual income per capita has grown at an average rate of 4.1% from 1950-1973 and at an average rate of 2.0% from 1974-2000.

Conventional wisdom would lead one to believe that such increases would only increase the happiness of society. The results, however, show otherwise. Unhappiness has actually increased based on studies of depression. Studies have some that there has been an increase in depression. 15% of people now experience some form of clinical depression by their mid-30s. Additional income seems only to help happiness in countries where the average per capita income is below $15,000 a year. In countries where it is above $15,000 a year, extra income has little effect.

Habit and Rivalry

From 1946-1986 the U.S. Gallup Poll asked people, "What is the smallest amount of money that a family of four needs to get along in this community?" The responses showed that as the actual average incomes rose, so did the amount people answered with. The amount that was given as a response grew in direct proportion to actual income. The two cause for the way in which this survey went involve the amount of income the people have experienced, habit, and the amount which others receive, rivalry.

Habituation can work for both bad and good things. People who are at a certain level of income become used to that amount and want to reach the next level. Once they reach the next level, the same process occurs and they continually want more. This leads to a decrease in happiness as people think they will always be happier if they can make a little more money.

Rivalry leads people to adjust their desired level of income based on what others have. There is a mentality that there is always someone doing better, so people strive to catch up to and outdo them. Studies have shown that if a person receives a 10% rise in income and so does everyone else, he will only experience 2/3 of the happiness he would have experienced if he was the only one to receive the increase.

This information is best shown in the results of the following two questions posed to Harvard graduate students:

1. Which of these two worlds would you prefer? (Prices are the same in each.)

A. You get $50K and others get half that.

B. You get 100k but others get more than double that.

2. Which of these two worlds would you prefer?

C. You get 2 weeks holiday and others get half that.

D. You get 4 weeks holiday but others get twice that.

The majority of respondants answered A to question 1 and D to question 2. The happiness of other people clearly affects the decision of the person in question 1 as they would be willing to accept half of the amount just so that others would get less. In question 2, however, the person does not seem to mind that others would be made better off. This shows that the theory of rivalry may only be valid when dealing with income amounts because the amount of vacation would certainly affect happiness.