Before I became a psychologist, my studies were centered on philosophy. At that time, I was intrigued by two equally significant yet frustratingly complex inquiries: What is our purpose, and what constitutes happiness?
Throughout the years, my practical application of psychology has consistently drawn my attention toward understanding and addressing the latter. Despite my personal and professional pursuits of happiness, it often appears as elusive as running water.
Grasping the concept of happiness is just as crucial for our clients, colleagues, family, and friends. It influences the values they adopt, the meanings they assign to their actions, and their overall way of living.
This article delves into that inquiry. What is happiness? What effects does it have on us, and in what ways can we cultivate an environment that encourages it?
Before proceeding, we thought you might be interested in downloading our three Happiness & Subjective Wellbeing Exercises for free. These comprehensive, science-based exercises will assist you or your clients in identifying authentic sources of happiness and strategies to enhance wellbeing.
What is Happiness in Life?
The groundbreaking Harvard Study of Adult Development, which started over 80 years ago and includes multiple generations, affirms the importance of happiness for our ongoing psychological and physiological health (Waldinger & Schulz, 2023).
Robert Waldinger, the latest steward of this research, affirms that happiness — particularly its most vital contributing element, good relationships — influences our health, wellbeing, workplace experiences, and our capacity to recover from challenging times in our lives (Waldinger & Schulz, 2023).
But, how do we define happiness?
A definition of happiness
Waldinger and Schulz (2023) suggest we must consider both immediate experiences and long-term aspects when attempting to grasp the essence of happiness.
Hedonic happiness refers to the fleeting, temporary experiences of joy occurring in the moment. It focuses on enjoyment in the present. Conversely, eudaimonic happiness encompasses a sense of “deep wellbeing where an individual perceives that their life carries meaning and purpose” (Waldinger & Schulz, 2023, p. 18).
Researcher and prominent author Brené Brown offers several insightful definitions that assist in exploring and answering the question “What is happiness?” Her research differentiates happiness from joy and contentment, defining happiness as “feeling pleasure often linked to the immediate environment or current circumstances” (Brown, 2021, p. 207).
A definition of joy
Brown (2021, p. 205) describes joy as a more intense feeling than happiness, characterized by “an intense feeling of deep spiritual connection, pleasure, and appreciation.”
A definition of contentment
In contrast, contentment measures our overall satisfaction in relation to a persistent desire for more.
Brown (2021, p. 205) articulates contentment as the “feeling of completeness, appreciation, and ‘enoughness’ experienced when our needs are fulfilled.”
A definition of subjective wellbeing
Subjective wellbeing (SWB) is a term commonly used in psychological studies to denote how individuals assess and evaluate their own lives.
Rather than being a singular concept, SWB encompasses reflective cognitive assessments about life satisfaction alongside positive and pleasant emotions. Research demonstrates that SWB correlates positively with improved health, longevity, creativity, and work performance (Diener et al., 2018).
The accompanying image illustrates various factors that affect happiness, especially genetics, circumstances, and thoughts. It underscores the significance of our mindset, attitudes, and emotions in shaping our positive connections with ourselves, our surroundings, and others.
The Happiness Paradox
Most, if not all, of your clients will clearly express their desire for happiness. It represents a fundamental psychological necessity and something most individuals strive to attain. However, there exists an uncomfortable paradox.
Research indicates that the relentless pursuit of happiness can lead to frustration and discontent. This quest may cause us to focus more on the negative aspects we wish to avoid (or lack) rather than on positive feelings like joy and gratitude that enhance our happiness (Ford et al., 2015).
Findings in happiness research suggest that we should also take essential contextual factors into account.
A study from 2015 concluded that “culturally bound meanings shape whether individuals’ pursuit of happiness is likely to result in more or — paradoxically — less actual happiness and wellbeing” (Ford et al., 2015, p. 8).
This implies that a one-size-fits-all method for addressing or understanding the “what is happiness” question does not exist.
Can Money Buy Happiness?
Have you ever fantasized about hitting the jackpot in the lottery?
It only requires a small investment and carries minimal risk, all while offering the chance for a significant payoff.
However, will it truly lead to your happiness? Will it provide enduring contentment?
Certainly, there will be a temporary surge in joy, but will all your problems completely disappear?
That’s what we will delve into today. We will investigate the economics of happiness and whether financial wealth can indeed purchase joy. In this article, we will begin by examining the topic broadly and then analyze various theories and substantial research findings. We will even look into the experiences of past lottery winners.
For those who are interested, we will suggest intriguing books and podcasts for further exploration and share some of our own resources related to happiness.
Let’s get started!
What Is Happiness Economics?
Happiness economics is a branch of economics that acknowledges happiness and wellbeing as significant outcome measures, alongside traditional metrics like employment, education, and healthcare.
This field emphasizes how specific economic and financial factors influence our wellbeing (Easterlin, 2004).
For instance, does having a job lead to improved health and longer life expectancy, among other measures? Do individuals in wealthier nations have improved access to education and extended lifespans?
In recent decades, the field of economics has changed, with researchers beginning to understand the significance of the subjective assessment of happiness as a valuable and desirable outcome that correlates strongly with other essential outcomes, such as health (Steptoe, 2019) and productivity (DiMaria et al., 2020).
In general, happiness is a psychological state defined and researched primarily through psychological methods (Diener et al., 2003). We typically assess it using self-report tools rather than objective measures, which are susceptible to misinterpretation and error.
Incorporating happiness into economics has opened a whole new area of research to explore the interplay between happiness and financial wealth.
Andrew Clark (2018) illustrates the variability in the concept of happiness economics with the following examples:
- Happiness can act as a predictive factor that affects our choices and actions.
- Happiness may be the ultimate goal, meaning understanding why some individuals are happier than others is critically important.
- However, the link between our actions and happiness requires further examination. Even though “being happy” is an end goal, people often make choices that hinder their happiness. For instance, why do we opt to work more if it doesn’t contribute to our happiness? Why do we feel discontent even when our primary needs are fulfilled?
An example of how happiness can shape decision-making
At times, we might decide not to pursue maximum monetary gains but instead prioritize alternative, more subjective outcomes.
Here’s a hypothetical scenario to illustrate: When choosing between two job offers—one that offers a high salary but no satisfaction and another that pays less but brings immense joy—some individuals might choose to optimize their happiness over financial benefits.
If this decision were analyzed solely through a utility framework that valued only practical outcomes, it would seem irrational. However, this situation indicates that psychological results, like the experience of happiness, hold equal importance to other socio-economic results.
Economists acknowledge that subjective wellbeing, or happiness, is a key attribute and can often serve as a desirable outcome that drives our choices.
In recent years, economics has evolved to integrate happiness as a measurable and vital element of overall wellbeing (Graham, 2005).
As a result, standard economic inquiries now consider how employment, finances, and other economic variables affect the subjective assessment and experience of happiness at both individual and national levels.
Theory of the Economics of Happiness
The overarching principle of the economics of happiness can be summarized as follows (Bruni, 2007):
Happiness is such a crucial outcome within society and economic activities that it deserves incorporation in policy development. The subjective assessment of happiness is as significant as other conventional measures utilized in economics.
Various factors can influence happiness. In this discussion, we will focus on the influence of money. The connection between happiness, or subjective wellbeing, and money is often believed to be positive: More wealth generally brings greater happiness.
Nevertheless, the relationship between financial resources and happiness is complex and paradoxical: Increased wealth does not always guarantee increased happiness (Graham, 2005; Killingsworth et al., 2023).
As stated by Killingsworth (as referenced in Berger, 2023, para 16), “Money is just one of the many determinants of happiness. […] Money is not the key to happiness, but it may contribute a little.”
Indeed, happiness appears to be influenced not only by the amount of money we possess but also by how it stacks up against that of our peers (Clark et al., 2008), how we utilize our finances (Van Boven & Gilovich, 2003), and the fact that we eventually adapt to higher income levels (Sheldon & Lyubomirsky, 2012).
This notion might contradict our daily experiences. Many of us tend to work longer hours or hold multiple jobs to increase our income. However, what is the purpose of this effort if an increase in money does not directly translate to a proportional increase in happiness? Why do we have this belief that more money will enhance our happiness?
Historical Context of Happiness Economics
The linkage between economics and happiness dates back to the early 1970s. Brickman and Campbell (1971, as cited in Brickman et al., 1978) initially posited that conventional indicators of a successful life, like wealth or income, had no effect on an individual’s wellbeing.
Easterlin (1974) built upon these findings and demonstrated that while wealthier individuals tend to report greater happiness than poorer individuals within the same nation, the overall happiness levels in a country did not change as its wealth increased.
The unpredictable correlation between happiness and income, coupled with the importance of specific income thresholds, makes this subject particularly intriguing.
Some empirical evidence suggests that wealthier nations have higher happiness levels compared to poorer ones, but this holds true primarily when contrasting the affluent with the impoverished (Easterlin, 1974; Graham, 2005).
As nations increase in wealth, their citizens generally report higher levels of happiness, but this connection is most significant when the starting point is poverty. Beyond a certain income threshold, the increase in happiness is negligible (Diener et al., 1993).
Interestingly, there is a common consensus on the financial amount deemed necessary for happiness; however, once a specific level is reached, additional income yields little increase in happiness (Haesevoets et al., 2022).
Challenges in Measurement
Accurately and consistently measuring happiness is a complex task. Scholars often have differing interpretations of what happiness entails.
Moreover, happiness can denote a transient emotional state, like the joy felt after a delightful meal, or a more enduring state that resembles contentment (Nettle, 2005).
Researchers may employ varying definitions of happiness and differing measurement methods, resulting in conflicting findings. For instance, happiness can be interchangeable with subjective wellbeing and encompass various aspects, including life satisfaction and financial contentment (Diener & Oishi, 2000).
Given the intricate relationship between income and happiness, numerous factors could explain why wealthier nations do not exhibit higher overall happiness compared to poorer nations and why enhancing the wealth of poorer nations doesn’t ensure an increase in their happiness as well. So, what measures could be taken to boost happiness?
Does Money Lead to Happiness? Five Research Insights
What is the connection between income or wealth and happiness? To explore this question, we reviewed studies on how money can enhance happiness while also acknowledging the limitations of income’s positive effects.
Money facilitates access; employment enhances happiness.
Extensive evidence indicates that wealth is linked to various measures of wellbeing.
More affluent individuals have greater access to quality healthcare, education, and job opportunities, leading to enhanced life satisfaction (Helliwell et al., 2012). A certain level of wealth is essential to cover basic needs, and fulfilling these needs boosts happiness (Veenhoven & Ehrhardt, 1995).
The potential for happiness through improved living conditions is greatest among low-income households, but this is dependent on their initial circumstances. Access to vital services enhances quality of life, which subsequently elevates wellbeing measures.
While individuals typically attain wealth through work, it is not the wealth alone that fosters happiness; rather, the act of being employed itself has a significant relationship with happiness. There is a notable correlation between happiness and employment (Helliwell et al., 2021).
Impact of Lockdown on Happiness
According to the World Happiness Report (Helliwell et al., 2021), the COVID-19 pandemic led to a rise in unemployment, which corresponded with a significant drop in happiness and hopefulness.
The pandemic also altered our assessments of certain life aspects; for instance, the link between income and happiness weakened. After all, what value does money hold if it cannot be utilized? Conversely, the connection between happiness and having a partner grew stronger (Helliwell et al., 2021).
Comprehensive investigations have examined whether an unexpected financial gain correlates with an increase in happiness (e.g., Sherman et al., 2020). The results have been varied. In certain instances, an increase in wealth is linked to enhanced life satisfaction and better physical and mental health.
However, this increase in happiness is not assured, nor is it lasting. Occasionally, individuals may even regret the occurrence (Brickman et al., 1978; Sherman et al., 2020).
Take lottery winners, for example. These individuals receive substantial amounts of money—usually more significant than a salary boost—large enough to influence their lives considerably. Despite this, studies have consistently indicated that while lottery winners experience a surge in short-term happiness immediately after winning, they do not enjoy greater long-term happiness (Sherman et al., 2020).
Several explanations for this phenomenon include:
- Routine activities and experiences tend to lose their appeal when contrasted with an exceptional experience like winning the lottery.
- People become accustomed to their new way of living.
- A sudden influx of wealth can disrupt social dynamics with friends and family members.
- Work and hobbies often provide us with small joys over extended periods (Csikszentmihalyi et al., 2005). Over time, these activities may lose their significance, leading to increased unhappiness (Sherman et al., 2020; Brickman et al., 1978).
- Sherman et al. (2020) further suggest that lottery winners who opt to leave their jobs after winning, but do not occupy their newfound free time with meaningful hobbies or interests, are more prone to unhappiness.
Engaging in passive activities doesn’t yield the same level of happiness as work or hobbies. Conversely, if lottery winners maintain participation in activities that provide them with purpose and require active involvement, they are likely to avert further unhappiness.
Happiness: Is it a sudden spike or a long-term condition?
Like many areas of psychological research, a significant challenge lies in precisely defining the subject of investigation, a task made more complex when the subject spans two highly distinct fields.
Nettle (2005) characterizes happiness as a three-tiered framework, ranging from fleeting but intense feelings on one end to a more abstract and profound understanding on the other.
The first layer encompasses temporary feelings of joy, such as the delight experienced when opening a birthday gift.
The second layer pertains to evaluations of those feelings, like being content with one’s job. The third layer is more intricate and relates to overall life satisfaction.
Across various studies, different definitions are employed: Participants respond regarding feelings of (immediate) joy, overall life satisfaction, moments of happiness or contentment, and mental well-being. While these concepts are similar, they are not identical, which affects the outcomes.