The Economics of Happiness: Crash Course Economics #35

CrashCourse
9 Jun 201610:25
EducationalLearning
32 Likes 10 Comments

TLDRThis economics video explores the complex relationship between money and happiness. It reviews studies showing that while income does correlate with happiness, the effect diminishes after about $75,000 per year. Other factors like unemployment, debt, and keeping up with the Joneses also impact happiness. The script discusses the Easterlin Paradox - the finding that national happiness levels don't always rise with national income increases. It also covers alternative economic progress measures like Bhutan's Gross National Happiness index that consider citizens' well-being. The script ends by quoting Robert Kennedy's criticism of judging progress by GDP alone rather than 'that which makes life worthwhile.'

Takeaways
  • 😀 Happiness and wellbeing should be considered in addition to economic growth when evaluating a country's progress.
  • 😊 There is a correlation between income and happiness, but the effect diminishes after a certain level.
  • 🤔 Unemployment has a significant negative impact on happiness beyond just loss of income.
  • 🧐 Status and relative income seem to matter more for happiness than absolute income levels.
  • 😕 The 'Easterlin Paradox' suggests that as a country gets richer, individual happiness does not rise.
  • 😞 Long commutes and high debt decrease happiness while full-time work increases it, up to a point.
  • 🙂 Psychologists previously thought we each have a happiness 'set point' that big events only temporarily alter.
  • 😀 The King of Bhutan proclaimed Gross National Happiness more important than Gross National Product.
  • 😊 In 2011 the UN called for giving more weight to happiness in development policies.
  • 🙂 Robert Kennedy criticized only measuring economic output, not 'that which makes life worthwhile'.
Q & A

  • What is the main focus of the video?

    -The main focus of the video is on happiness - what makes people happy, the relationship between income and happiness, and how governments measure progress and make policy decisions based on happiness versus purely economic factors.

  • What is the Easterlin Paradox?

    -The Easterlin Paradox refers to the finding by economist Richard Easterlin that as a country's income rises, the average happiness levels of its citizens does not always increase accordingly.

  • What is the hedonic treadmill concept?

    -The hedonic treadmill concept suggests that people quickly adapt to improvements in their lives and return to a relatively stable level of happiness. So while more money initially brings more happiness, people adapt and it ceases to have the same effect.

  • What is gross national happiness?

    -Gross national happiness (GNH) is an alternative measure of progress used by some governments instead of economic measures like GDP. GNH considers broader aspects of wellbeing like environmental, social, and spiritual health.

  • What is the reference-income hypothesis?

    -The reference-income hypothesis states that people derive satisfaction from their income and consumption relative to those around them, not just from absolute levels. So if everyone gets richer, an individual's happiness may not rise.

  • How does unemployment impact happiness?

    -Research shows unemployment has a significant negative effect on happiness, beyond what can be explained solely by loss of income. This is likely due to increased stress and uncertainty about the future.

  • What are some critiques of using GDP as a progress measure?

    -Critiques argue that GDP focuses only on economic output and ignores other aspects of wellbeing. Over-emphasis on GDP growth could come at the expense of rising inequality, environmental damage, etc.

  • What was Robert Kennedy's viewpoint?

    -Robert Kennedy criticized the sole focus on GDP, arguing that it "measures everything except that which makes life worthwhile." He advocated for a broader consideration of national progress.

  • What is the relationship between income and happiness?

    -Studies show a correlation between income and happiness, but the effect levels off at a certain point. Extreme wealth seems to provide some increased life satisfaction, but not improved emotional wellbeing.

  • What role do psychologists think set points play?

    -Psychologists previously thought people had set happiness set points and would return to those after external events. But newer research indicates life circumstances can have lasting impacts on wellbeing.

Outlines
00:00
📺 Introducing the economics of happiness

The first paragraph introduces the concept that happiness does not always correlate with income and material possessions. It discusses research showing that activities with no monetary reward can provide more happiness than paid work, and that income has diminishing returns for day-to-day happiness beyond around $75,000 per year.

05:00
😀 How our happiness compares to our neighbors'

The second paragraph examines how our happiness levels relate to the income and status of those around us. It introduces concepts like the reference-income hypothesis and Easterlin paradox which suggest that relative income and status matter more than absolute income.

10:01
👋 Concluding the series on economics and happiness

The final paragraph concludes the video and series on economics and happiness. It reflects on alternative measures of progress like Bhutan's Gross National Happiness over typical economic metrics like GDP. The paragraph and video end with a relevant quote highlighting that economic measures fail to capture much of what makes life meaningful.

Mindmap
Keywords
💡Happiness
A state of well-being, satisfaction, and positive emotions. The video discusses research on factors that influence happiness, like income level and employment status. It also examines the relationship between economic growth and rising societal happiness.
💡Income
Money earned from work or investments. Studies show greater income correlates with more happiness, but the effect diminishes after about $75,000 per year in the U.S. The video also discusses relative income and how people often care more about status than absolute income level.
💡Unemployment
The state of being without a job. Studies show unemployment causes a significant drop in happiness, beyond what can be explained by loss of income alone. This may be due to heightened anxiety about the future during joblessness.
💡Economic Growth
An increase in production of goods and services in an economy. Traditionally a key goal of policymakers, but the video questions using GDP growth as the sole measure of a society's progress if it does not track with rising happiness.
💡Easterlin Paradox
The theory that as national income rises, average happiness levels do not always increase accordingly. Proposed explanations include the hedonic treadmill theory and the importance of relative status over absolute income.
💡Gross National Happiness
A metric adopted by Bhutan to guide policy, focused on holistic well-being instead of economic output. Other countries are now following suit to complement GDP with happiness indicators.
💡Hedonic Adaptation
The tendency to return to a relatively stable level of happiness after a major positive or negative life event. For example, buying a luxury item brings joy at first, but it fades as one adapts to the new lifestyle.
💡Social Comparisons
The human tendency to evaluate themselves based on how they stack up to peers. In terms of income, studies show people often care more about having higher status than others in their surroundings.
💡Consumption
Purchasing and using goods and services. The video questions whether increased consumption uniformly improves well-being, since people may fall into a hedonic treadmill focused on status and acquisition above a certain level.
💡Well-Being
A broad concept encompassing health, happiness, life satisfaction, and prosperity. The video advocates for placing greater emphasis on well-being measures over pure economic metrics when evaluating national progress.
Highlights

First significant research finding

Introduction of new theoretical framework

Notable contribution to the field

Transcripts

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