The Seven Secrets of a Happy Life-FINANCIAL TIMES ARTICLE

Many of us struggle to find real happiness. Why is that? Studies in psychology suggest that part of the reason is that most of us are very bad at predicting how we’ll react when faced with many of life’s experiences. Consequently, we end up making choices that are potentially harmful to our emotional well-being. According to Harvard psychologist Daniel Gilbert, we tend to overestimate, by a long way, the extent and duration of the emotional impacts of, say, a pay rise, the death of a loved one, or even moving to an area that’s sunny all year round. This is simply because, when we’re trying to imagine how an experience will affect us emotionally, we tend to focus too much of our attention on the most salient features of the experience in question. In reality, however, the many other less salient features that we often fail to consider will have emotional consequences. Los Angeles, for instance, is actually thousands of miles away from our friends and family; we need to work harder in order to earn more. This explains why happiness often eludes us when we blindly follow our imaginations or what conventional wisdom tells us about what makes us happy.

So where should we look for happiness? New research in psychology and economics suggests the answer lies in what we already have ? things like friends and family. The secret to being happy is simply to devote more of our time and attention to these happiness-rich and fulfilling experiences.

As the US rabbi Hyman Schachtel once famously said: “Happiness is not having what you want, but wanting what you have.”

1. Money buys you little happiness

One of the most infamous findings in happiness research is that money doesn’t buy a lot of happiness ? or at least not as much as we think it should. According to the economist Richard Easterlin, part of the reason for this is that we care a great deal more about what other people earn than what we do ourselves.

For those whose most basic needs are already met, money buys additional happiness only if it can lead to higher status in society, which is hard when everyone else is also getting richer over time. Since people’s comparison group varies from place to place, those living in more affluent areas of London, for example, would probably need to earn at least ￡200k a year to ensure that they are staying well ahead of most other Londoners ? and even that might not be enough.

Moreover, according to the Princeton University psychologist Daniel Kahneman, the weak relationship between happiness and income can also be explained, in part, by the evidence that richer people tend to spend more time engaging in activities associated with no greater happiness, on average, but with slightly higher tension and stress ? such as work, childcare and shopping. By contrast, people with lower incomes tend to spend more time engaging in happiness-rich experiences such as socialising with friends and other passive leisure activities such as resting and watching TV.

However, when these high- and low-income earners are prompted to think about the impact of income on their happiness, both tend to focus more on the conventional possibilities of money when evaluating its effects. This leads to the conclusion that life must be significantly happier for the rich than for the poor.

The truth is quite the opposite: poorer people can ? and often do ? lead significantly happier lives than the rich.

2. Friends are worth more than a new Ferrari

The price of happiness

By using a seven-point Likert scale, happiness researchers were able to quantify how much certain life events are worth*

Excellent health

+￡1,300,000

Marriage

+￡200,000

Regularly talking to your neighbours

+￡120,000

Retirement

+￡114,000

Death of a friend

-￡8,000

Death of a child

-￡126,000

Divorce

-￡296,000

Death of a partner

-￡312,000

* Value in the first year
How much money is enough to make us happy? Because the effect of income on our happiness depends largely on how much money our colleagues, neighbours and friends earn, it’s difficult to say. Yet it’s easier to say how much extra money is required, on average, for a socially isolated person to be just as happy as a socially active person ? no more, no less.

The calculation of prices of various non-marketable goods such as the joy of friendship or marriage, first put forward in the early 1990s by the University of Warwick economist Andrew Oswald, is based on a very simple idea. Imagine that, on average, money makes people happy. Imagine also that people who see their friends every day are significantly happier than those who live in isolation. In principle, then, it’s possible to calculate how much extra income would have to be given to someone to compensate exactly for the lack of social life.

In Britain, for example, a pay rise of ￡1,000 is associated with an increase in happiness of approximately 0.0007 points on a self-reported seven-point happiness scale. Seeing friends more often, on the other hand, is associated with an increase in happiness of approximately 0.161 points. What this implies is that swapping a sociable life for an isolated one requires a pay rise of approximately 0.161/0.0007 ? roughly ￡230,000 a year. That’s a little more than a new, gleaming Ferrari 612 Scaglietti.

3. Winning the lottery won’t make you instantly happy

One of the most surprising findings in recent research shows that a lottery win of ￡1,000 or more won’t immediately make you happy. Instead, it takes two years before winners enjoy their money. This is in stark contrast to the effect of earned incomes on happiness: an increase in salary often leads to some immediate improvement (again, not as much as one would think) in a person’s happiness. But why does the joy from a lottery win take two years to arrive? One hypothesis is that, while traditional economic theories typically assume that a pound is a pound is a pound, the reality is that one pound won is not the same as one pound earned.

From new research on “lagged deservingness” among lottery winners that I undertook with economists Andrew Oswald and Rainer Winkelmann, earned income is regarded as money that is intrinsically deserved. Lottery income isn’t. The winner doesn’t immediately think that she is fully deserving of the money because winning the lottery creates a form of unwanted cognitive dissonance ? the process associated with holding two contradictory ideas in one’s head. The winner thinks: “I’m happy about the money, but I’m not sure whether I’m really entitled to it.” Through time, however, the lottery winner can persuade herself that she deserves the money. Empirically speaking, this slow erosion of cognitive dissonance takes approximately two years to complete. Interestingly, we also found in our study that people weigh differently the various incomes that accrue to them: gift income and inheritance income are viewed in a very different way to wage income and lottery income.

A pound is not just a pound.

4. Losing your job makes you unhappy ? but less so when others have too

Losing your job is one of life’s most miserable experiences ? more so than getting a divorce. One reason for this is obvious: unemployment removes a constant stream of income. Even so, the unemployed also report substantially lower levels of happiness relative to those who are employed but have the same income. The psychic cost of unemployment can in part be explained by the social stigma and loss of self-esteem job loss entails.

There is a flipside to this, though. While unemployment lowers well-being for both the unemployed and the employed (perhaps by creating expectations of job loss), its effect on those already unemployed is notably reduced when a lot of other people ? colleagues, neighbours, people living in the same region or even in the same household ? are also unemployed.

The reason is simple, argues the economist Andrew Clark of the Paris School of Economics. Where being unemployed is the norm, the impact on your reputation caused by job loss is lessened. In other words, it feels relatively OK to be unemployed when a lot of others are also unemployed.

In fact, the well-being gap between the employed and the unemployed actually ceases to exist if the unemployment rate is high enough. Average happiness is typically lower in high-unemployment areas relative to low-unemployment areas. Yet, in the UK this happiness gap disappears completely when the average regional unemployment rate tops 20 per cent. Bad things don’t seem so bad when you’re not alone in experiencing them.


5. Fat friends make you happier than thin ones

New evidence in economics and epidemiology seems to suggest that we care about other people’s weight as much as we do our own. It’s always more desirable to be slim ? perhaps because it offers a better chance of finding a person to date or marry, or even faster job promotion. However, when the people we normally compare ourselves with become fatter, the cost of putting on weight for many of us reduces. Put simply, when other people around me become fatter, I don’t have to compete so much with them to stay slim.

According to research conducted by economists David G. Blanchflower, Andrew Oswald and Bert Van Landeghem, people with weight problems ? those with a body mass index (BMI) of 30 or over ? are significantly unhappier than people within a healthy weight range (BMI 18.5?25). However, the overweight tend to report higher levels of happiness when other people of the same age and gender are as heavy or heavier than they are. The same also goes for individuals who live in the same household: our own weight doesn’t bother us as much, that is, when our partner is also putting on weight.

This positive relationship between our happiness and other people’s weight provides a good psychological explanation for the current obesity epidemic in the west. It’s psychologically easier for us to accept being overweight when everyone else is also overweight ? assuming, of course, that most of us enjoy food a lot more than dieting.

6. Divorce can make you happy

At any given point in time, those who are divorced tend to report, on average, significantly lower levels of happiness than people who are married. While this result is probably unsurprising to many people, such cross-sectional comparisons between two groups of individuals at the same point in time can often lead to severely misleading conclusions ? in this case, that divorce makes people unhappy.

For one thing, the choice to dissolve a marriage is a rare decision for any individual to take, and one that’s unlikely to have been made entirely on a whim. One could even argue that divorce must make people happy given that one would only go through with it if the benefits of doing so outweighed the costs. This leads to an important question: what happens to people’s happiness in the periods before and after divorce?

According to the psychologist Ed Diener, the worst moment for men is the year preceding the divorce. By contrast, the worst moment for women is two years before the divorce, with their happiness on the verge of bouncing back the year preceding the split. This pattern probably reflects the fact that the majority of divorces are initiated by the wife.

After a divorce, it then takes approximately two years for men and three years for women for the effect of the break-up on happiness to become positive and stay positive. In other words, it seems that divorcing couples often become significantly happier with their lives by breaking up.

7. Happiness is contagious

There are many benefits to being happy. Happier people tend to be healthier, live longer and earn more. They also tend to volunteer more, be better at relationships and smile more of what psychologists call “Duchenne” or genuine smiles. Less well understood is why happiness is contagious.

According to James Fowler and Nicholas Christakis, authors of the international bestseller Connected, people surrounded by many happy friends, family members and neighbours who are central to their social network become significantly happier in the future. More specifically, they say we will become 25 per cent happier with our life if a friend who lives within a mile of us becomes significantly happier with his or her life.

Similar effects are seen in co-resident spouses (8 per cent happier); siblings who live within a mile of each other (14 per cent); and next-door neighbours (34 per cent). What this implies is that the magnitude of happiness spread seems to depend more on frequent social contact (due to physical proximity) than on deep social connections. Alas, for some reason this doesn’t translate to the workplace.

So, why is happiness contagious? One reason may be that happy people share their good fortune with their friends and family (for example, by being pragmatically helpful or financially generous). Another reason could be that happy people tend to change their behaviour for the better by being nicer or less hostile to those close to them. Or it could just be that positive emotions are highly contagious.

In short, happiness is not only desirable for personal reasons; its pay-offs can also be of unimaginable value to society as a whole.


DISCLAIMER:
This article was taken from the Financial Times. Originally published on August 28, 2010. By Nick Powdthavee and Carl Wilkinson. Nick Powdthavee is a behavioural economist and author of ‘The Happiness Equation’ (Icon Books).