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Bernanke on Happiness

by Scott Gast on 4th June 2010

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In early May of this year, Ben Bernanke, the Chairman of the U.S. Federal Reserve, gave the commencement speech at the University of South Carolina. The speech was somewhat unusual: It was about the economics of happiness, a topic many economists avoid, deeming it fuzzy, subjective, or “not rigorous.” Even more surprising was Bernanke’s willingness to note that GDP and annual salaries aren’t ends in themselves, but rather small pieces of a meaningful human life. Here are a few snippets of what he had to say to this year’s USC graduates (emphasis added):

“Another area of this research bears directly on what I said earlier about the relationship between income and happiness. Some years ago the economist Richard Easterlin showed that, just as would be expected, wealthier people in any given country are more likely to tell a survey-taker that they are happy with their lives than are poorer people in the same country. However, Easterlin also found two other things that don’t fit so well with the economic perspective. First, he found that as countries get richer, beyond the level where basic needs such as food and shelter are met, people don’t report being any happier. For example, although today most Americans surveyed will tell you they are happy with their lives, the fraction of those who say that they are happy is not any higher than it was 40 years ago, when average incomes in the United States were considerably lower and few could even imagine developments like mobile phones or the Internet…

Now, research in social science is hardly ever the final word, and a large body of more recent research has contested Easterlin’s results, finding that people in rich countries may, on average, be happier or more satisfied after all. But this research still suggests that the increase in happiness flowing from greater wealth is moderate. For example, reported levels of life satisfaction among Americans are similar to reported levels among Costa Ricans, who have about one-quarter the per capita income. So I am going to continue under the assumption that, although wealth and income do contribute to happiness and life satisfaction, other factors must also be very important. Or, as your parents always said, money doesn’t buy happiness. Well, an economist might reply, at least not by itself.”

He goes on:

“We all know that getting a better-paying job is one of the main reasons to go to college, and achieving economic security for yourself and your family is an important and laudable goal. But if you are ever tempted to go into a field or take a job only because the pay is high and for no other reason, be careful! Having a larger income is exciting at first, but as you get used to your new standard of living, and as you associate with other people in your new income bracket, the thrill quickly wears off. Some interesting studies of winners of large lottery prizes, even in the millions of dollars, found (as you would expect) that they were happy and excited on learning that they had won. But only six months later they reported being not much happier than they were before they won the lottery. The evidence shows that, by itself, money is not enough. Indeed, taking a high-paying job only for the money can detract from happiness if it involves spending less time with your family, stress, and other such drawbacks…

…Happy people tend to spend time with friends and family and put emphasis on social and community relationships. We are social creatures. Research has demonstrated that happiness and life satisfaction are perhaps more closely related to participating meaningfully in a network of friends, family, and community than any other factor. I urge you to take this research to heart by making time for friends and family and by being part of and contributing to a larger community.”

If a guy like Bernanke — whose economics are probably as mainstream it gets — is open to a wider notion of what the economy is for, then I’m hopeful for the future of that discussion. After all: At the end of the day, Bernanke, like any economist of any stripe, is a human being. Even he must go for a walk in the woods once in a while to clear his head of those GDP numbers.

Go here to read a full transcript of the speech.

Image credit: Wikimedia Commons.

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avatar Scott walks, bikes, reads, and lives in rural western Massachusetts. His day jobs have included stints at YES! Magazine, the City of Chicago's Waste to Profit Network, and The Nature Conservancy. He is a graduate of the Environmental Science program at Allegheny College, and Special Projects Assistant at Orion Magazine.

Scott has written 17 posts on Post Growth Institute. Contact Scott

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