What would make you happier in 2016?
If you could change one aspect of your life during 2016, what would make you the happiest? Imagine yourself on December 31, 2016 looking back with satisfaction on 2016. What would it be?
Standard economics has an answer. It is illustrated by this anecdote conveyed to me by Professor Amartya Sen, Nobel Laureate in Economics. Walking through Harvard Square one day Professor Sen asked me, “What should you do if you see a person trying to cut his fingers off with a pair of dull scissors?”
My response: stop him from cutting off his fingers, call the police for help, etc.
“Offer him sharper scissors,” was Professor Sen’s answer. Standard (a.k.a. “neoclassical”) economics assumes that people know what they want. Professor Sen is a critic of some aspects of neoclassical economics, so his question (and answer) was a rhetorical maneuver designed to educate.
Let us to return to your happiness in 2016. Did you secretly answer, more money?
More money, more money, more money. Yes, yes, and even more yes. More money would make everything better. Pay off some bills, wrestle the monetary stress monkey off your shoulders, take a well-earned vacation. Send some cash to Mom. Yes. More money.
To the answer of more money, neoclassical economics says amen. Standard economics assumes that people know what they want (have “stable preferences”) and know how to make themselves happy (“maximize”). Thus, the way to make someone happier is to increase their opportunities — more money and more time.
We make the Harvard Square resident happier by helping achieve her or his goal, not by imposing our own goals. Similarly, all we have to do to make anyone happier is provide more money or more time. The individual will make the best choices for themselves.
Thus, the neoclassical economic prescription is clear. More money, better medicine, a fountain of youth. Case closed.
Just as you are ready to seal your 2016 wish for a winning lottery ticket, Professor Richard Thaler yells, “Wait a minute!” Neoclassical economics is all wrong according to Thaler (you can read his recent book Misbehaving or watch his talk summarizing the book and his career).
Behavioral economics argues that the neoclassical economics is wrong. Real humans, in the language of behavioral economic founders Daniel Kahneman and Amos Tversky, exhibit biases and heuristics, or, more colloquially, humans are crazy.
For the sake of your 2016 wishes, behavioral economics makes three related claims. First, people do not know what makes them happy. Second, fewer options are sometimes better than more options. Third, more money may not make you happier.
A key moment in Richard Thaler’s intellectual life involved a bowl of cashews. Thaler was hosting a party, and had served some cashews as an appetizer. His guests were voraciously eating the nuts; so much so that Thaler worried their appetites would be satisfied before dinner. He removed the remaining cashews. The result? His guests thanked him.
What do cashews have to do with economics? Neoclassical economics argues that people should always be happier with the option to eat cashews. Thus, Thaler’s guests should have been unhappy when he reduced their choices.
Perhaps, Thaler realized, standard economics is wrong in assuming people are rational maximizers. If this is true, perhaps the person in Harvard square attempting to self mutilate with blunt scissors would be happier with fingers than without.
Does more money equal more happiness? It sure feels like it to me. However, there is a major academic debate on this topic, and one (almost settled) result is that extra money does not make any permanent change in happiness for most people.
“Wealth is the parent of luxury and indolence, and poverty of meanness and viciousness, and both of discontent,” so wrote Plato more than two thousand years ago. Plato’s complex view on the relationship between money and happiness is a reasonable summary of the field today.
So if money is not the key to happy 2016 what might be? Mired in internecine warfare between neoclassical and behavioral schools, economics cannot help.
The Darwinian view is that happiness is a tool to guide behavior toward evolutionary success. Can this perspective help?
Allow me to cut directly to my speculative answer. Physical activity is much more likely to make you happier than money. If that is true, why do I/we often want to lie on the couch instead of running marathons.
My speculation is that we are built to get pleasure from activities that lead to evolutionary success. However, what matters for our happiness brain structures is the relationship between behavior and evolutionary success, not for us, but for our ancestors.
Let me continue my just-so story by asserting that up until fairly recently on an evolutionary timescale, humans were often hungry and extremely physically active. Our ancestors would have benefitted from a day on the couch eating high-caloric foods. Compared to us, they had very high activity levels, lower caloric intake, and fewer possessions.
The ‘mismatch’ idea is that while our world has changed incredibly rapidly, our genes and brains have not. Thus, our tastes still reflect the world of our ancestors. So we think more money will make us happier, because more resources would have led our ancestors to greater evolutionary success. Similarly, we are built to be energetic thrifty because because our ancestors were on a tight caloric budget.
In short, we love to eat and sleep because eating and sleeping were good for our ancestors.
What is your reaction to the ‘cavewoman and caveman’ approach to understanding your 2016? Perhaps you are thinking of Voltaire, “Things cannot be other than they are… Everything is made for the best purpose. Our noses were made to carry spectacles, so we have spectacles. Legs were clearly intended for breeches, and we wear them.” (This is actually Voltaire mocking the ideas of the German 17th century philosopher Gottfried Leibniz who was known for his optimism and for arguing that our world was the best possible one.)
We tend to love money because resources were good for our ancestors, and many of us hate useless exercise because it was bad for our ancestors. Without evidence, this can be criticized as a ‘just-so’ story. Stephen Jay Gould and Richard Lewontin make just such a critique of evolutionary thinking in their famous 1979 paper, The Spandrels of San Marcos, and they include the Voltaire section above.
What is the response to the Gould and Lewontin critique? Yes, at worst, my caveperson explanation is just-so story.
One person’s just-so story, is another’s NSF grant application. There are many scholars working hard to convert evolutionary hypotheses to testable theories, but, as of 2015, these approaches are not fully investigated. Consequently, I support spending more money investigating evolutionary hypotheses over the next 20-100 years.
What about our 2016 resolutions? Can we wait for decades? No. We have to decide now. Here are three possible choices for 2016.
- Neoclassical economics. Pursue the almighty dollar
- Behavioral economics. Hide cashews from yourself. Stumble around confused.
- Evolutionary economics. Work out more. You are smarter than your brain.