answer questions

..lit ...... •.......... ..• E ..-­ ••.. •.... ••••.. II II ..1ft

Robert H. Frank

How not to buy happiness

An enduring paradox in the Iit~rature on human happiness is that although the rich are significantly happier than the poor within any country at any mo­ ment, average happiness levels change very little as people's incomes rise in tandem over time. l Richard Easterlin and others have interpreted these ob­ servations to mean that happiness de­ pends on relative rather than absolute income. 2

In this essay I offer a slightly different interpretation of the evidence namely, that gains in happiness that might have been expected to result from growth in absolute income have not materialized because of the ways in which people in affluent societies have generally spent their incomes.

In effect, I wish to propose two differ­ ent answers to the question "Does mon­ ey buy happiness?" Considerable evi­ dence suggests that if we use an increase in our incomes, as many of us do, simply

Roberl H. Frank is H. f. Louis Professor of Eco· nomics at the Johnson Graduate School of Man­ agl'ment, Cornell University. His books include "Choosing the Right Pond" (1985), "Passions Within Reason," (1988), and "Luxury rever" (1999 ).

© 2004 by the American Academy of Arts & Sciences

to buy bigger houses and more expen­ sive cars, then we do not end up any happier than before. But if we use an increase in our incomes to buy more of certain inconspicuous goods such as free­ dom from a long commute or a stressful job - then the evidence paints a very dif­ ferent picture. The less we spend on con­ spicuous consumption goods, the better we can afford to alleviate congestion; and the more time we can devote to fam­ ily and friends, to exercise, sleep, travel. and other restorative activities. On the best available evidence, reallocating our time and money in these and similar ways would result in healthier, longer ­ and happier lives .

The main method that psychologists have used to measure human well-being has been to conduct surveys in which they ask people whether they are: a) very

I This paper draws heavily on chapters 5 and 6 of my book Luxury Fever (New York: The Free Press, 1999).

2 Richard Easterlin, "Does Economic Growth Improve the Human Lot?" in Nations and Households in Economic Growtl! : Essays in Honor of Moses Abramovitz, ed. Paul David and Melvin Reder (New York: Academic Press, 1974), and Richard Easterlin, "Will Raising the Incomes of All Increase the Happiness of All 1" Journal of Economic Behavior and Organizalion 27 (1995):

35 47·

Dredalus Spring 2004

453

Robert H. Frank on happiness

happy; b) fairly happy; or c) not happy.3 Most respondents are willing to answer the question, and not all of them re­ spond "very happy," even in the United States, where one might think it advan­ tageous to portray oneself as being very happy. Many people describe themselves as fairly happy, and others confess to being not happy. A given person's re­ sponse tends to be consistent from one survey to the next.

Happiness surveys and a variety of other measures employed by psycholo­ gists are strongly correlated with observ­ able behaviors that we associate with well-being. 4 If you're happy, for exam­ ple, you're more likely to initiate social contact with friends. You're more likely to respond positively when others ask you for help. You're less likely to suffer from psychosomatic illnesses digestive disorders, other stress disorders, head­ aches, vascular stress. You're less likely to be absent from work or to get in­ volved in disputes at work. And you're less likely to attempt suicide - the ulti­ mate behavioral measure of unhappi­ ness. In sum, it appears that human hap­ piness is a real phenomenon that we can measure.s

How does happiness vary with in­ come? As noted earlier, studies show

3 See Easterlin, "Does Economic Growth Im­ prove the Human Lot?"

4 For surveys of this evidence. see chapter 2. of Robert H. Frank. Choosing the Right Pond (New York: Oxford University Press, 1985) and An· drew Clark and Andrew Oswald, "Satisfaction and Comparison Income." lemn/a/ oj PutJ/ic Eco­ nomics 61 (1996): 359 - 381.

5 Ed Diener and Richard E. Lucas, "Personality and Subjective Well-Being," in Un(/erstanding Well-Being: Scientific Perspectives on Enjoyment and Sujj'erjng, ed. Daniel Kahneman. Ed Diener, and Norbert Schwartz (New York: The Russell Sa~ Foundation. 1998).

Dreda/us Spring 2.004

1

I ,that when incomes rise for everybody, well-being doesn't change much. Con­

~ sider the example ofJapan, which was a very poor country in 1960. Between then and the late 1980s, its per capita income rose almost four-fold, placing it among the highest in the industrialized world. Yel the average happiness level reported by the Japanese was no higher in 1987 than in 1960.6 They had many more washing machines, cars, cameras, and other things than they used to, but they did not register significant gains on the happiness scale.

The same pattern consistently shows up in other countries as well, and that's a puzzle for economists. If getting more income doesn't make people happier, why do they go to such lengths to get more income? Why, for example, do to­ bacco company CEOs endure the public humiliation of testifying before Con­ gress that there's no evidence that smok­ ing causes serious illnesses '1

It turns out that if we measure the in­ come-happiness relationship in another way, we get just what the economists suspected all along. When we plot aver­ age happiness versus average income for clusters of people in a given country at a given time, we see that rich people are in fact much happier than poor people. In one study based on U.S. data, for exam­ ple. people in the top decile of the in­ come distribution averaged more than five points higher on a ten-point happi­ ness scale than people in the bottom decile.7

The evidence thus suggests that if in­ come affects happiness, it is relative, not

6 Ruut Veenhoven, Happiness in Nations (Rot­ terdam: Erasmus University. 1993).

7 Ed Diener, Ed Sandvik, Larry Seidlitz. and Marissa Diener. "The Relationship Between In­ come and Subjective Well-Being: Relative or Absolute 7" Soci"l Indicators Research 28 (1993): 195 -22.3.

70

4')4

• • • • • •

• • • • • •

• • • • • • • • • • • • • • • • • •

• • • • •

•

• • • •

•

• •

absolute, income that matters. Some so­ cial scientists who have pondered the significance of these patterns have con­ cluded that, at least for people in the world's richest countries, no useful pur­ pose is served by further accumulations ofwealth. 8

On its face. this should be a surprising conclusion. since there are so many seemingly useful things that having ad­ ditional wealth would enable us to do. Would we really not be any happier if. say. the environment were a little clean­ er, or if we could take a little more time off, or even just eliminate a few of the hassles of everyday life? In principle at least. people in wealthier countries have these additional options, and it should surprise us that this seems to have no measurable effect on their overall well­ being.

There is indeed independent evidence that having more wealth would be a good thing, provided it were spent in certain ways. The key insight supported by this evidence is that even though we appear to adapt quickly to across-the-board in­ creases in our stocks of most material goods, there are specific categories in which our capacity to adapt is more lim­ ited. Additional spending in these cate­ gories appears to have the greatest ca­ pacity to produce significant improve­ ments in well-being.

The human capacity to adapt to dra­ matic changes in life circumstances is impressive. Asked to choose, most peo­ ple state confidently that they would rather be killed in an automobile acci­ dent than to survive as a quadriplegic. And so we are not surprised to learn that severely disabled people experience a

8 See, for example, Peter Townsend. "The Development of Research on Poverty," in Social Security Research: Tile Definition and Measurement of Poverly (London: HMSO, 1979).

period of devastating depression and disorientation in the wake of their acci­ dents. What we do not expect, however, are the speed and extent to which many of these victims accommodate to their new circumstances. Within a year's time. many quadriplegics report roughly the same mix of moods and emotions as able-bodied people do. 9 There is also ev­ idence that the blind, the retarded, and the malformed are far better adapted to the limitations imposed by their condi­ tions than most of us might imagine. 10

We adapt swiftly not just to losses but also to gains, Ads for the New York State Lottery show participants fantasizing about how their lives would change if they won. (''I'd buy the company and fire my boss.") People who actually win the lottery typically report the anticipat­ ed rush of euphoria in the weeks after their good fortune. Follow-up studies done after several years, however, indi­ cate that these people are often no hap­ pier and indeed, are in some ways less happy - than before. 1 1

In short, our extraordinary powers of adaptation appear to help explain why absolute living standards simply may not matter much once we escape the physi­ cal deprivations of abject poverty. This interpretation is consistent with the im­ pressions of people who have lived or

9 R. J. Bulman and C. B. Wortman. "Attributes of Blame and 'Coping' in the 'Real World': Se­ vere Accident Victims React to Their Lot." Jour· nal of Personality and Social Psychology 35 (May 1977): 3S1- 363.

10 P. Cameron, "Stereotypes About Genera­ tional Fun and Happiness vs. Self-Appraised Fun and Happiness," Tile Gerontologist 12 (Sum­ mer 1972): 120 - 123.

11 P. Brickman, D. Coates, and R. Janoff-Bul­ man, "Lottery Winners and Accident Victims: Is Happiness Relative?" Journal of Personality and Social Psychology 36 (August 1978): 917 - 927.

How nor to buy happiness

Dredalus Spring 2004 71

455

Robert H. Frank on happiness

traveled extensively abroad, who report that the struggle to get ahead seems to play out with much the same psychologi­ cal effects in rich societies as in those with more modest levels of wealth. 12

These observations provide grist for the mills of social critics who are offend­ ed by the apparent wastefulness of the recent luxury-consumption boom in the United States. What many of these crit­ ics typically overlook, however, is that the power to adapt is a two-edged sword. It may indeed explain why having bigger houses and faster cars doesn't make us any happier; but if we can also adapt ful­ ly to the seemingly unpleasant things we often have to endure to get more money, then what's the problem? Perhaps social critics are simply barking up the wrong tree.

I believe, however, that to conclude that absolute living standards do not matter is a serious misreading of the evidence. What the data seem to say is that as national income grows, people do not spend their extra money in ways that yield significant and lasting in­ creases in measured satisfaction. But this still leaves two possible ways that ab­ solute income might matter. One is that people might have been able to spend their money in other ways that would have made them happier, yet for various reasons they did not, or could not, do so. I will describe presently some evidence that strongly supports this possibility.

The second possibility is that although measures of subjective well-being may do a reasonably good job of tracking our experiences as we are consciously aware of them, that may not be all that matters to us. For example, imagine two parallel universes, one just like the one we live in

12 David G. Myers, The Pursuit of Happiness: Who is Happy and Why? (New York: Avon, 1993)·

now and another in which everyone's in­ come is twice what it is now. Suppose that in both cases you would be the median earner, with an annual income of $100,000 in one case and $200,000 in the other. Suppose further that you would feel equally happy in the two uni­ verses - an assumption that is consistent with the evidence discussed thus far. And suppose, finally, that you know that people in the richer universe would spend more to protect the environment from toxic waste, and that this would result in healthier and longer, even if not happier, lives for alL Can there be any question that it would be better to live in the richer universe?

My point is that although the emerg­ ing science of subjective well-being has much to tell us about the factors that contribule to human satisfaction, not even its most ardent practitioners would insist that it offers the final word. Whether growth in national income is, or could be, a generally good thing is a question that will have to be settled by the evidence.

And there is in fact a rich body of evi­ dence that bears on this question, One clear message of this evidence is that, beyond some point, across-the-board increases in spending on many types of material goods do not produce any last­ ing increment in subjective well-being. Sticking with the parallel-universes met­ aphor, let us imagine people from two societies, identical in every respect save one; in society A everyone lives in a house with 4,000 square feet of floor space, whereas in society B each house has only 3,000 square feet. If the two societies were completely isolated from one another, there is no evidence to sug­ gest that psychologists and neuroscien­ tists would be able to discern any signifi­ cant difference in their respective aver­ age levels of subjective well-being. Rath-

Dcedalus Spring 200472

456

• • • • • • •

• • • • • • • • • • • • • • •

,• ••••

er, we would expect each society to have developed its own local norm for what constitutes adequate housing, and that people in each society would therefore be equally satisfied with their houses and other aspects of their lives.

••

Moreover, we have 110 reason to sup­ pose that there would be other impor­ tant respects in which it might be prefer­ able to be a member of society A rather than society B. Thus the larger houses in society A would not contribute to longer

•

• lives, more freedom from illness, or in­ deed any other significant advantage

• over the members of society B. Once

• house size achieves a given threshold, the human capacity to adapt to further

• • across-the-board changes in house size would appear to be virtually complete.

Of course, it takes real resources to build larger houses. A society that built 4,000-square-foot houses for everyone could have built 3,000-square-foot hous­ es instead, freeing up considerable re­ sources that could have been used to produce something else. Hence this cen­ tral question: Are there alternative ways of spending these resources that could have produced lasting gains in human welfare?

••

An affirmative answer would be logi­ cally impossible if our capacity to adapt to every other possible change were as great as our capacity to adapt to larger houses. As it turns out, however, our capacity to adapt varies considerably across domains. There are some stimuli, such as environmental noise, to which we may adapt relatively quickly at a

•

conscious level, yet to which our bodies continue to respond in measurable ways even after many years of exposure. And there are stimuli to which we never adapt over time but rather become sensi­ tized; various biochemical allergens are examples, but we also see instances on a more macro scale. Thus, after several

• It

••

months' exposure, the office boor who How not /0 buyinitially took two weeks to annoy you happiness

can accomplish the same feat in only seconds.

The observation that we adapt more fully to some stimuli than to others opens the possibility that moving re­ sources from one category to another might yield lasting changes in well­ being. Considerable evidence bears on this possibility.

A convenient way to examine this evidence is to consider a sequence of thought experiments in which you must choose between two hypothetical societies. The two societies have equal wealth levels but different spending pat­ terns. In each case, let us again suppose that residents of society A live in 4,000­ square-foot houses while those of socie­ ty B live in 3,000-square-foot houses.

In each case, the residents of society B use the resources saved by building smaller houses to bring about some oth~ er specific change in their living condi­ tions. In the first thought experiment, 1 will review in detail what the evidence says about how that change would affect the quality of their lives. Tn the succeed­ ing examples, I will simply state the rele­ vant conclusions and refer to supporting evidence published elsewhere.

Which would you choose: society A, whose residents have 4,000-sguare-foot houses and a one-hour automobile com­ mute to work through heavy traffic; or society B, whose residents have 3,000­ square-foot houses and a fifteen-minute commute by rapid transit?

Let us suppose that the cost savings from building smaller houses are suffi­ cient to fund not only the construction of high-speed public transit, but also to make the added flexibility of the auto­ mobile available on an as-needed basis. Thus, as a resident of society B, you need

Dredalus Spring 2004

457

73

Robert II. Frank on happiness

not give up your car. You can drive it to work on those days when you need extra flexibility, or you can come and go when needed by taxi. The only thing you and others must sacrifice to achieve the shorter daily commute of society R is additional floor space in your houses.

A rational person faced with this choice will want to consider the avail­ able evidence on the costs and benefits of each alternative. As concerns the psy­ chological cost ofliving in smaller hous­ es, the evidence provides no reason to believe that if you and all others live in 3.000-square-foot houses. your subjec­ tive well-being will be any lower than if you and all others live in 4.000-square­ foot houses. Of course, if you moved from society B to society A. you might be pleased, even excited, at first to expe­ rience the additional living space. But we can predict that in time you would adapt and simply consider the Jarger house the norm.

Someone who moved from society B to society A would also initially expe­ rience stress from the extended com­ mute through heavy traffic. Over time, his consciousness of this stress might diminish. But there is an important dis­ tinction: unlike his essentially complete adaptation to the larger house, his adap­ tation to his new commuting pattern will be only partial. Available evidence clearly shows that, even after long peri­ ods of adjustment, most people experi­ ence the task of navigating through heavy commuter traffic as stressful. 13

In this respect, the effect of exposure to heavy traffic is similar to the effect of exposure to noise and other irritants. Thus, even though a large increase in background noise at a constant, steady level is experienced as less intrusive as

13 Meni Koslowsky, Avraham N, Kluger, and Mordechai Reich, Commuting Stress (New York: Plenum, 199.5).

time passes, prolonged exposure none­ theless produces lasting elevations in blood pressure. I 4 If the noise is not only loud but intermittent, people remain conscious of their heightened irritability even after extended periods of adapta­ tion. and their symptoms of central ner­ vous system distress become more pro­ nounced. is This pattern was seen, for example, in a study of people living next to a newly opened noisy highway. Four months after the highway opened, 21 percent of residents interviewed said they were not annoyed by the noise, but that figure dropped to 16 percent when the same residents were interviewed a year later. 16

Among the various types of noise exposure, worst of all is exposure to sounds that are not only loud and inter­ mittent, but also unpredictably so, Sub­ jects exposed to such noise in the labora­ tory experience not only physiological symptoms of stress, but also behavioral symptoms. They become less persistent in their attempts to cope with frustrat­ ing tasks, and suffer measurable impair­ ments in performing tasks requiring care and attention.!7

Unpredictable noise may be particu­ larly stressful because it confronts the subject with a loss of control. David Glass and his collaborators confirmed this hypothesis in an ingenious experi­

14 David C. Glass, Jewme Singer, and James Pennegaker, "Behavioral and PhYSiological Ef­ fects of Uncontrollable Environmental Events," in Perspectives on Environment and Behavior. ed, Daniel Stokols (New York: Plenum, i977),

lS Ibid,

16 N, D, Weinstein., "Community Noise Prob­ lems: Evidence Against Adaptation," Journal of Environmental Psychology 2 (1982): 82 - 97.

17 Glass et al., "Behavioral and Physiological Effects of Uncontrollable Environmental Events,"

Dcedalus Sprillg 2004 74

458

ment that exposed two groups of sub­ jects to a recording of loud unpredict­ able noises. Whereas subjects in one group had no control over the recording, subjects in the other group could stop the tape at any time by flipping a switch. These subjects were told, however, that the experimenters would prefer that they not stop the tape, and most subjects honored this preference. Following ex­ posure to the noise, subjects with access to the control switch made almost 60 percent fewer errors than the other sub­ jects on a proofreading task and made more than four times as many attempts to solve a difficult puzzle. 18

Commuting through heavy traffic is in many ways more like exposure to loud unpredictable noise than to constant background noise. Delays are difficult to predict, much less control, and one nev­ er quite gets used to being cut off by drivers who think their time is more valuable than anyone else's. A large sci­ entific literature documents a multitude of stress symptoms that result from pro­ tracted driving through heavy traffic.

One strand in this literature focuses on the experience of urban bus drivers, whose exposure to the stresses of heavy traffic is higher than that of most com­ muters, but who have also had greater opportunity to adapt to those stresses. A disproportionate share of the absen­ teeism of urban bus drivers stems from stress-related illnesses such as gastroin­ testinal problems, headaches, and anxi­ ety.1 9 Many studies have found sharply elevated rates of hypertension among bus drivers relative to those of a variety of control groups, including a control

18 Ibid.. figures 5 and 6.

19 L. Long and J. Perry. "Economic and Occu­ pational Causes of Transit Operator Absentee­ ism: A Review of Research," Transport Reviews 5 (1985): 2.47 - 267.

group of bus drivers pre-employment. 20 Additional studies have found elevations of stress hormones such as adrenaline, noradrenaline, and cortisol in urban bus drivers.21 And one study found eleva­ tions of adrenaline and noradrenaline to be strongly positively correlated with the density of the traffic with which the bus drivers had to contend. 22 More than half of all urban bus drivers retire pre­ maturely with some form of medical dis­ ability.23

A one-hour daily commute through heavy traffic is presumably less stressful than operating a bus all day in an urban area. Yet this difference is one of degree rather than of kind. Studies have shown that the demands of commuting through heavy traffic often result in emotional and behavioral deficits upon arrival at home or work. 24 Compared to drivers

20 D. Ragland, M. Winkleby, J. Schwalbe, B. Holman, L. Morse, 1.. Syme, and J. Fisher, "Prevalence of Hypertension in Bus Driver~." InternationalJournal of Epidemiology 16 (1987): 208 - 214; W. Pikus and W. Tarranikova, "The Frequency of Hypertensive Diseases in Pnhlic Transportation," Terapevischeskii Archives 47 (1975): 135 - 137; and G. Evans, tvL Palsane, and S. Carrere. "Type A Behavior and Occnpational Stress: A Cross-Cultural Study of Blne-Collar Workers," Journal of Personality and Social Psy­ chology 52 (1987): 1002 - 1007.

21 Ibid.

2.2 G. Evans and S. Carrere, "Traffic Conges­ tion, Perceived Control, and Psychophysiologi­ cal Stress Among Urban Bus Drivers," Journal of Applied Psychology 76 (1991): 658 - 663.

23 Gary W. Evans, "Working on the I-lot Seat: Urban Bus Drivers," Accident Analysis and Pre­ vention 26 (1994): 181- 193.

24 David C. Glass and Jerome Singer, Urban Stressors: Experiments on Noise and Social Stres­ sors (New York: Academic Press, 1972); D. R. Sherrod, "Crowding, Perceived Control, and Behavioral Aftereffects," Journal of Applied Social Psychology 4 (1974): 171 -186.

Dcedalus Spring 2004

459

110"" not to buy Il(lppiness

7S

RolJert I-I. Frank on Iloppiness

who commute through low-density traf­ fic. those who commute through heavy traffic are more likely to report feelings of annoyance. 2S And higher levels of commuting distance, time. and speed are significantly positively correlated with increased systolic and diastolic blood pressure. 26

The prolonged experience of commut­ ing stress is also known to suppress im­ mune function and shorten longevity.2. 7 Even daily spells in traffic as brief as fif­ teen minutes have been linked to signif­ icant elevations of blood glucose and cholesterol, and to declines in blood co­ agulation time all factors that are posi­ tively associated with cardiovascular dis­ ease. Commuting by automobile is also positively linked with the incidence of various cancers, especially cancer of the lung, possibly because of heavier expo­ sure to exhaust fumes.2.8 The incidence of these and other illnesses rises with the length of commule,29 and is significant­ ly lower among those who commute by bus or rail,3 0 and lower still among non­

2S Daniel Stoko15, Raymond W, Novaco, Jean­ nette Stokols, and Joan Campbell, "Traffic Con­ gestion, Type A Behavior, and Stress," journal of Applied PSYc/l(l/Ogy 63 (1978): 467 480,

26 Ibid" table 3,

27 Anita DeLongis, Susan Folkman, and Rich­ ard S. Lazarus, "The lmpact of Daily Stress on Health and Mood: Psychological and Social Resources as Mediators," journal of Personality and Social Psychology 54 (J 988): 486 495,

28 Koslowsky et aI., Commuting Stress, chap. 4,

2.9 Koslowsky et aL, Commutillg Stress,

30 P. Taylor and C. Pocock, "Commuter Travel and Sickness: Absence of London Office Work­ ers," British/oumal of Preventive and Social Medi­ cine 26 (1972): 165-172; Meni Koslowsky and Moshe Krausz, "On the Relationship Between Commuting, Stress Symptoms, and Attitudinal

Dredllius Spring 2004

commuters.3I Finally, the risk of death and injury from accidents varies posi­ tivelywith the length of commute and is higher for those who commute by car than for those who commute by public transport.

In sum, there appear to be persistent and significant costs associated with a long commute through heavy traffic. We can be confident that neurophysiologists would find higher levels of cortisol, nor­ epinephrine, adrenaline, noradrenaline, and other stress hormones in the resi­ dents of society A, No one has done the experiment to discover whether people from society A would report lower levels of life satisfaction than people from soci­ ety B. but sin.ce we know that drivers of­ ten report being consciously aware of ~ the frustration and stress they experi­

Ience during commuting, it is a plausible conjecture that subjective well-being, as 4 conventionally measured, would be low­ er in society A, Even if the negative ef­ 4 fects of commuting stress never broke 4 through into conscious awareness, how­ ever, we would still have powerful rea­ 4 sons for wishing to escape them. t

On the strength of the available evi­ dence, then, it appears that a rational t person would have powerful reasons

••• t

to choose society B, and no reasons to avoid it. And yet, despite this evidence, the United States is moving steadily in the direction of society A. Even as our houses continue to grow in size, the av­ erage length of our commute to work

• t

Measures," journal of Applil:'dBehaviaral Sci­ el)C"s (December 1993): 485 492. • 31 European Foundation for the Improvement of Living and Working Conditions, "The Jour­ • ney from Home to the Workplace: The Impact on the Safety and Health of the Community/ • Workers" (Dublin: European Foundation for the Improvement of Living and Working Con­ • ditions, 1984). •

• •• I

•460

• • •

.. ,. .. .­ .. • • •

• • • • • • • .. • •.. • • ••.... lit

.... .. .. .. .. • ••• It ..lit It

Table 1 Hmvl1o/ to buyFour thought experiments' the conspicuous consumption of society A verSllS the inconspicllous happiness

consumption of society II

Society A Society B

Everyone lives in 4,000-square-foot houses and has no free time for exercise each day.

2 Everyone lives in 4,ooo-square-foot houses and has time to get together with friends one evening each month.

3 Everyone Jives in 4,00o-square-foot houses and has one week of vacation each year.

4 Everyone lives in 4,ooo-square-foot houses and has a relatively low level of personal autonomy in the workplace.

continues to grow longer. Between 1982 and 2000, for example, the time penalty for peak-period travelers increased from 16 to 62 hours per year; the daily window of time during which travelers might experience congestion increased from 4.5 to 7 hours; and the volume of road­ ways where travel is congested grew from 34 to 58 percentYl. The Federal Highway Administration predicts that the extra time spent driving because of delays will rise from 2.7 billion vehicle hours in 1985 to 11.9 billion in 2005.33

Table 1 lists four similar thought ex­ periments that ask you to choose be­ tween societies that offer different com­ binations of material goods and free time to pursue other activities. Each case assumes a specific use of the free time and asks that you imagine it to be one that appeals to you (if not, feel free to substitute some other activity that does).

32 David Schrank and Tim Lomax, The 2002­ Urban Mobility Report, Texas Transportation Institute, <http://mobility.tamu. edu/>.

33 Charles S. Clark. "Traffic Congestion," The CQResearcher, 6 May 1994. 387 404.

Everyone Jives in 3.000-square-foot houses and has 45 minutes available for exercise each day.

2 Everyone lives in 3,ooo-square-foot houses and has time to get together with friends four evenings each month.

3 Everyone lives in 3.000-square-foot houses and has four weeks of vacation each year.

4 Everyone lives in 3,000-square-foot houses and has a relatively high level of personal autonomy in the workplace.

The choice in each of these thought experiments is one between conspicu­ ous consumption (in the form of larger houses) and what, for want of a better term, 1shall call inconspicuous con­ sumption freedom from traffic conges­ tion, time with family and friends, vaca­ tion time, and a variety of favorablejob characteristics. In each case the evidence suggests that subjective well-being will be higher in the society with a greater balance of inconspicuous consllmp­ tion.3 4 And yet in each case the actual trend in U.S. consumption patterns has been in the reverse direction.

The list of inconspicuous consump­ tion items could be extended consider­ ably. Thus we could ask whether living in slightly smaller houses would be a reasonable price to pay for higher air quality, for more urban parkland, for cleaner drinking water, for a reduction in violent crime, or for medical research that would reduce premature death. And in each case the answer would be the same as in the cases we have considered thus far.

34 For a detailed survey of the supporting stud­ ies, see Frank, Luxury Fever, chap. 6.

Dredalus Spring 2004 77

461

• • •

• • • • • • • • • • • • • • •

4 4 4 4

Roherl11. Frank on happiness

My point in the thought experiments is not that inconspicuous consumption is always preferable to conspicuous con­ sumption. Indeed, in each case we might envision a minority of rational individu­ als who might choose society A over so­ ciety B. Some people may simply dislike autonomy on the job, or dislike exercise, or dislike spending time with family and friends. But if we accept that there is lit­ tle sacrifice in subjective well-being when all have slightly smaller houses, the real question is whether a rational person could find some more productive use for the resources thus saved. Given the absolute sizes of the houses involved in the thought experiments, the answer to this question would seem to be yes.

It might seem natural to suppose that when per capita income rises sharply, as it has in most countries since at least the end of World War n, most people would spend more on both conspicuous and in­ conspicuous consumption. In many in­ stances, this is in fact what seems to have happened. Thus the cars we buy today are not only faster and more luxuriously equipped, but also safer and more reli­ able. If both forms of consumption have been rising, however, and if inconspicu­ ous consumption boosts subjective well­ being. then why has subjective well­ being not increased during the last sev­ eral decades?

A plausible answer is that whereas some forms of inconspicuous consump­ tion have been rising, others have been declining, often sharply. There have been increases in the annual number of hours spent at work in the United States during the last two decades; traffic has grown considerably more congested; savings rates have fallen precipitously; personal bankruptcy filings are at an all­ time high; and there is at least a wide­ spread perception that employment se-

Da!(/(llus Spring 2004

•••

4

curity and autonomy have fallen sharply. Declines in these and other forms of in­ conspicuous consumption may well have t offset the effects of increases in others.

• t

The more troubling question is why we have not used our resources more wisely. If we could all live healthier, longer, and

• 4

more satisfying lives by simply changing our spending patterns, why haven't we done that? t

As even the most ardent free-market economists have long recognized, the t invisible hand cannot be expected to de­ liver the greatest good for all in cases in which each individual's well-being de­ pends on the actions taken by others with whom he does not interact directly. This qualification was once thought im­ t portant in only a limited number ofare­

• t

nas most importantly, activities that generate environmental pollution. We now recognize. however, that the inter­ dependencies among us are considerably • more pervasive. For present purposes, chief among them are the ways in which • the spending decisions of some individ­ • uals affect the frames of reference within which others make important choices.

Many important rewards in life - ac­ cess to the best schools, to the most de­ sirable mates, and even. in times of fam­ ine, to the food needed for survival depend critically on how the choices we make compare to the choices made by • others. In most cases, the person who • stays at the office two hours longer each day to be able to afford a house in a bet­ • ter school district has no conscious in­ tention to make it more difficult for oth­ ers to achieve the same goal. Yet that is an inescapable consequence of his ac­ tion. The best response available to oth­ ers may be to work longer hours as well, thereby to preserve their current posi­ tions. Yet the ineluctable mathematical .. logic of musical chairs assures that only 10 percent of all children can occupy

462

top-decile school seats, no matter how many hours their parents work.

That many purchases become more attractive to us when others make them means that consumption spending has much in common with a military arms race. A family can choose how much of its own money to spend, but it cannot choose how much others spend. Buying a smaller-than-average vehicle means greater risk of dying in an accident. Spending less on an interview suit means a greater risk of not landing the best job. Yet when all spend more on heavier cars and more finely tailored suits, the results tend to be mutually off­ setting. just as when all nations spend more on armaments. Spending less­ on bombs or on personal consumption­ frees up money for other pressing uses, but only if everyone does it.

What. exactly, is the incentive prob­ lem that leads nations to spend too much on armaments? It is not sufficient merely that each nation's payoff from spending on arms depends on how its spending compares with that of rival na­ tions. Suppose, for example, that each nation's payoff from spending on non­ military goods also depended, to the same extent as for military goods, on the amounts spent on nonmilitary goods by other nations. The tendency of military spending to siphon off resources from other spending categories would then be offset by an equal tendency in the oppo­ site direction. That is, if each nation had a fixed amount of national income to al­ locate between military and nonmilitary goods, and if the payoffs in each catego­ ry were equally context sensitive, then we would expect no imbalance across the categories.

For an imbalance to occur in favor of armaments, the reward from armaments spending must be more context sensi­ tive than the reward from nonmilitary

spending. And since this is precisely the case, the generally assumed imbalance occurs. After all. to be second best in a military arms race often means a loss of political autonomy clearly a much higher cost than the discomfort of hav­ ing toasters with fewer slots.

In brief, we expect an imbalance in the choice between two activities if the indi­ vidual rewardsfrom one are more con­ text sensitive than the individual re­ wards from the other. The evidence de­ scribed earlier suggests that the satisfac­ tion provided by many conspicuous forms of consumption is more context sensitive than the satisfaction provided by many less conspicuous forms of con­ sumption. If so, this would help explain why the absolute income and consump­ tion increases of recent decades have failed to translate into corresponding increases in measured well-being.

How not to buy happiness

Dredaius Spring 2004 79

463