When I decided to take an economics class in high school, my only motive was to fulfill a social science requirement. On the first day my teacher asked the class to explain in a short paragraph why it was important to study economics. I struggled to answer that question and for a long time could not formulate an intelligent response for I had no prior knowledge in the subject. Yet as the school year passed I fell deeply in love with that which some label as “the dismal science.” I found that because economics explains people’s behavior with so much logic and rationality, learning about the models made my own life more meaningful. Indifference curves, production functions, and utility theories quickly grew to be integral parts of my philosophy. And after almost five years of exploring the field, I can now proudly declare that I know precisely why I study economics and why it is important for others to do so too.
Steven Landsburg, author of The Armchair Economist, once said that businessmen want people to die rich and economists want people to die happy. Economics is the search for the best way to allocate limited resources in order to satisfy unlimited wants, for the paths people should take to arrive at the maximum level of utility under a certain budget constraint. When an individual has a given level of income, he must choose among numerous goods he wishes to consume. Since higher income allows one to purchase bigger bundles of goods, it is then perhaps natural to subscribe to the common belief of “more is better” and thus seek after the ways to increase material wealth. Yet Anke Zimmermann in time-series survey data analysis observes, “on average, an individual’s well-being does not improve despite increases in income.” This result appears puzzling if one is unaware that consumer products’ price and impact on happiness are
not always proportional; in fact goods can be divided into categories, some of which bring lasting increase in wellbeing and other do not. Understanding the difference among these types of goods helps consumers to make wise purchase decisions.
Many assume that they can derive the most satisfaction from purchasing materialistic goods such as luxurious cars and large mansions. I had believed that too, until I enrolled in a course titled “The Economics of Happiness” last semester. In that class I learned to examine time series data and identify how life circumstances such as getting married, having children, surviving accidents, and winning the lottery affect wellbeing. Through reading scholarly journals and participating in class surveys, I discovered that as welfare economist Tibor Scitovsky (pictured to the right) has stated, luxury or “comfort” goods like iPods and cell phones merely increase happiness temporarily, and only cultural or “stimuli” goods such as books, concerts, and theatrical productions have lasting positive effects on one’swelfare. Moreover, people tend to compare their collection of “positional” or material possessions, to those of others. When one discovers that his peers drive better cars or live in bigger houses than he does, he feels miserable under the influence of social comparison. And according to economics professor Richard Easterlin, assets that improve welfare the most are non-pecuniary
and non-positional and thus cannot be used as standards to compare oneself to other people. Good health, time spent with family, and personal hobbies fall under this category.
After studying economics and its connection to happiness I realized that my lifestyle had been too materialistically oriented. And I learned that from enjoying pastimes, developing artistic interests, and investing in interpersonal relationships I will find more lasting joy than from buying jewelry and clothes. Yet because our American culture places an emphasis on consumerism and the pursuit of wealth, many are still unaware of the fact that a more extravagant lifestyle does not necessarily lead to a happier life. It is then the responsibility of those who are well informed in the subject to share this knowledge with others, as I hope to do through this blog. I believe that education plays an important role in showing people the ways in which they can improve their wellbeing without laboring for additional income.