Living Economics

Happiness - Absolute or Relative?
If happiness depends on one's relative wealth, one will never be absolutely happy as long as there are others who are even richer.

Rational consideration suggests that as everyone becomes richer in a society that overall societal happiness will increase. However, one study by Richard Layard found that respondents preferred to have an average income as long as their neighbors made even less money. They shunned the choice to be absolutely richer if their neighbors would gain even more. In other words, the higher income of others is actually a negative externality. This peculiarity implies that relative status is their fundamentally important consideration, not wealth in itself. Studies show that to be true, again emphasizing the role of relative status in happiness. The bottom line is that the high standard of living in modern society might have failed to raise the overall level of happiness (Economist).

Psychobiology, or the study of the brain and mind, holds a plausible solution to this intriguing question. Territoriality and the drive for social dominance originate in the older parts of the brain, while rational thought is processed in the newer neocortex part of the brain ("The three..."). That brain organization suggests that people determine their happiness and status with minimal use of their rational facilities.

If this explanation holds true, any hope for increasing societal happiness through increased income is lost. Humans are simply hardwired to feel down if they are lower in the socioeconomic hierarchy. However, some have suggested that the pursuit of happiness may be possible by alternate routes, such as the promotion of leisure.

Layard's study suggests that the competition found in material consumption does not carry over into leisure consumption. Respondents preferred more days of vacation time even if their peers had twice as much.

It may be that leisure is not a significant factor in the determination of status. Possessions, being more persistent and evident, are a more effective method of communicating status. Leisure may even be inversely proportional to status, as many executives and even lower workers are taking less vacation time in order to advance in the competitive corporate environment (Valenti).

With the drive for status overriding the drive for leisure, feelings of happiness may suffer. If happiness requires both some measure of status and a significant amount of leisure time then excessively trading one for the other will never lead to a fulfilling life.

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