We’ve been through a lot lately: a pandemic, ongoing war, high interest rates, inflation and market volatility. As we enter another year, we may all benefit from a bit more happiness. Studies continue to show that cultivating an optimistic view leads to better outcomes, and this can extend into our financial lives. In fact, the “economics of happiness” has become a recognized field of study, supported by doctoral dissertations and professorships. For years, Harvard, Stanford and Yale have offered business courses devoted to happiness. And, social psychologists continue to actively study the human quest for happiness, so much so that it has become big business.
The Economics of Happiness
There is, indeed, a link between happiness and economic outcomes. Research shows that it can make us more productive, wealthier and nicer. The share price of Fortune’s 100 Best Companies to Work For posted annual increases of 14 percent, compared to just six percent for the overall market between 1998 to 2005. One study primed people to feel happy and found they were 12 percent more productive than their peers. Another looked at hundreds of studies on the causal effect of success on happiness and found the reverse: the stronger effect was how happiness engenders success. A recent study in China may provide some insight: when web broadcasters who rely on voluntary viewer tips for income showed more positive emotions, their tips increased.
Yet, when it comes to the happiness of society as a whole, we may not be doing a good job. The World Happiness Report suggests that worry and sadness have been rising over the past 10 years. It may be particularly telling that Canada has fallen in its global happiness rank: from 5th in 2012 to 15th in 2022. Wealth has increased substantially, but we haven’t increased our happiness. This may not necessarily be a surprise — many studies show that while wealth leads to improved happiness, once it reaches a certain level the effects plateau: Money can buy happiness, but only to a certain extent. As such, many economists now argue that we need a greater focus on increasing societal happiness. Back in the 1970s, Bhutan began to track happiness through its Gross National Happiness Index. Other countries, like New Zealand and the U.K., have now begun to follow suit by building well-being metrics into their policymaking.
Is happiness the key? Reflecting on the many challenges of today, happiness guru Arthur Brooks believes so: “you have to start (by) trying to simulate a happiness movement...Then you save the country.”