People often conflate “happiness” with “life satisfaction.” According to Bernanke, researchers define happiness as a transitory emotion that is influenced significantly by your current circumstances, including the weather and even the time of day (2010). On the other hand, they use life satisfaction to refer to a long-term state of contentment and well-being. Psychologist Abraham Maslow captures the conditions that give humans life satisfaction in his Hierarchy of Needs (1943). These are usually portrayed as a pyramid (though Maslow did not initially present it this way) in order to represent Maslow’s contention that each level must be achieved before progressing to the next level. For example, if a person does not have their physiological needs met, they will be focused on those before pursuing safety needs, which is the next step on the pyramid. While most of the needs might seem pretty obvious, I want to point out that the self-actualization need can include things like partner acquisition, parenting, pursuing goals, and utilizing and developing talents and abilities.
It should also be noted that Maslow would later revise and expand his Hierarchy of Needs to include:
- Cognitive needs
- Aesthetic needs
- Transcendence
For Maslow, transcendence included the need to help others and to seek spiritual transcendence.
Other researchers have added two significant ideas to Maslow’s Hierarchy. The first is that the steps are fluid, and the pursuit of various goals can overlap at different stages in our lives. Second, you can achieve high levels of self-actualization, but if the lower needs have not been met, you will be forever trying to find them. The news is filled with stories of stars with wealth and fame who missed the needs lower on the pyramid and had tragic ends to their lives.
Figure 2.2. Maslow’s Hierarachy of Needs by Androidmarsexpress is used under a CC By-SA 4.0 License
I find it pretty amazing that Ben Bernanke, Chair of the Federal Reserve Bank—the bastion of capitalism—would give a commencement address on the economics of happiness. In fact, Bernanke did just that at the University of South Carolina on May 8, 2010 (Bernanke 2010). This is exactly the kind of advice that you are looking for in this book! Bernanke opened his addressed by saying,
As you might guess, when thinking about the sources of psychological well-being, economists have tended to focus on the material things of life…. This traditional economist’s perspective on happiness is not as narrow and Scrooge-y as you might think at first. There is now a field of study, complete with doctoral dissertations and professorships, called ‘the economics of happiness.’ The idea is that by measuring the self-reported happiness of people around the world, and then correlating those results with economic, social, and personal characteristics and behavior, we can learn directly what factors contribute to happiness (2010).
What gives people life satisfaction is not just material wealth. In fact, although rich people in developed nations self-report that they are somewhat happier than poor people in those nations, people in poor nations report that they are pretty much just as satisfied with their lives as those in rich nations. As a matter of fact, in the United States, real per capita income has almost tripled over the time period 1946 to 1991 but average happiness has not changed at all. This finding is called the Easterlin Paradox, named after the researcher who discovered it.
Similarly, Easterlin also found that as countries around the world get richer (economists measure this as Gross Domestic Product per capita) people do not report being happier. And in comparing rich countries to poor countries, Easterlin also found that once you get above a certain amount of income that satisfies basic material needs, people in rich countries do not report being much happier than people in poor countries (Easterlin, 1974). Additional research on the Easterlin Paradox has shown that even though people in rich countries may be more satisfied than people in poor countries, the increase in happiness due to greater wealth is moderate (Bernanke 2010). Do not forget that rich countries have more leisure time, better health care, often less corruption and other benefits. The explanation for the Easterlin Paradox, according to Bernanke, is that relative wealth is much more important than absolute wealth.
A behavioral economic phenomenon called hedonic adaptation is also at work here (Frederick and Lownestein 1999). Humans are adaptable, and, like lottery winners who seem to return to their base level of happiness within six months, adaptation to any additional income causes us to return to our base level of life satisfaction. Finally, Bernanke relates what the economics of happiness tells us will give us life satisfaction. Here are some of the highlights from his 2010 address:
- “Happy people tend to spend time with friends and family and put emphasis on social and community relationships.”
- “Another factor in happiness, perhaps less obvious, is based on the concept of ‘flow.’ When you are working, studying, or pursuing a hobby, do you sometimes become so engrossed in what you are doing that you totally lose track of time? That feeling is called flow.”
- “Another finding is that happy people feel in control of their own lives. A sense of control can be obtained by actively setting goals that are both challenging and achievable.”
- “Finally–and this is one of the most intriguing findings–happiness can be promoted by fighting the natural human tendency to become entirely adapted to your circumstances. One interesting practical suggestion is to keep a ‘gratitude journal,’ in which you routinely list experiences and circumstances for which you are grateful.”
You will no doubt see some parallels to Maslow’s Hierarchy of Needs. Maslow spent a lot of time studying exceptional people such as Albert Einstein to see what made them feel fulfilled. His Hierarchy of Needs is a prescription for what will make humans happy—not just an academic study in developmental psychology.