Condition of economy not impacting happiness

By DAVID MOON, Moon Capital Management, LLC
July 10, 2011

Data released last week and reported in this newspaper indicates that the economy has improved significantly – but for large companies, not for most individuals. Strangely, however, that seems to have had little negative impact on Americans' happiness quotient.

There is a measurable dichotomy between the recovery experienced by corporations and individuals. Cost cutting during the recession that technically ended two years ago is paying off for businesses, as corporate profits are expected to be strong for the second quarter of 2011. The combined second quarter net income of the S&P 500 companies is expected to increase 13.6 percent from the same period in 2010.

Personal unemployment remains above nine percent and has only steadied because people are dropping out of the job market. Housing prices continue to decline.

It is fortunate that most people don’t read the General Social Survey from the University of Chicago, because researchers there have concluded that we apparently determine our own personal success or failures by measures established by others.

Despite the economic woes of the past several years and the fact that most people describe the economy in gloomy terms, 29 percent of Americans describe themselves as “very happy,” about the same percentage that did prior to any sign of financial malaise in 2006. What the researchers have discovered is that macroeconomic measures matter little when explaining Americans happiness. When the economy gets stronger, we don't get any happier, nor do large numbers of us change our self description from happy to unhappy when GDP declines or unemployment rises.

The University of Chicago folks speculate this is because we measure ourselves against the Joneses, not some internal yardstick. And as long as everyone else is suffering, we don’t feel so bad for suffering either.

Makes sense. As long as my neighbor’s lawn doesn’t look better than mine, a little drought and some brown grass in my yard is no big deal.

There could be a deeper reason, however.

Maybe money doesn't buy happiness.

There is a minimum sustenance level of resources that a person needs to meet his physical requirements. Below that level, a lack of money causes all sorts of problems. Once a person reaches that level, however, money ceases to be primary. It becomes a second-level causation variable in our lives.

When our basic needs are met, the importance of money is determined by our choices, not our needs.

Sadly, our decision processes as adults are often no more sophisticated than they were as 14-year-olds: “What are the cool kids doing?”

As long as they are safe and fed, cultures without iPads, jet skis and even paved roads and air conditioning are not statistically less happy than those of us in the richest country in the world.

There are, of course, petty people who will always begrudge those who don't share in whatever misery they are enjoying at the moment. Those are the people about whom Mark Twain referred when he said “few men can stand prosperity - another man’s that is.”

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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