Tuesday, March 25, 2008

Giving Makes You Happy: Behavioral Economics Wins Again

Most of us were schooled in neoclassical economics, which makes a series of assumptions about  the behavior of homo economis that behavioral economists and their colleagues in other disciplines dispute.  These and other heterodox economic approaches are gradually creating much more sophisticated notions of how the world works. Some of the most interesting research is on happiness.  What makes people happy -- is it the self-interested behavior that we typically associate with rational actors in economics and public choice theory or something else?  Does money make people happy as economists tend to assume?   Some more light on these issues has been provided by some new research by social psychologist Elizabeth Dunn of the University of British Columbia.

While rich people are a little happier than poor people, the correlation between wealth and happiness is weak. It turns out that how we spend our money may be most important in creating happiness.  While we think we'd rather spend money on ourselves than others, actually spending money on others makes people happier. 

According to Dunn the effects of altruistic spending are probably akin to those of exercise,  which can have immediate and long-term effects. Giving once might make a person happy for a day, but "if it becomes a way of living, then it could make a lasting difference," she says. She hopes the finding might someday spur policymakers to promote widespread philanthropy that could make for a more altruistic--and happier--population.

Check out ScienceNOW Daily News, March 20, 2008 for the full report.

http://lawprofessors.typepad.com/environmental_law/2008/03/giving-makes-yo.html

Economics, Governance/Management, Social Science | Permalink

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