Happiness and wealth, again

On an earlier post on life satisfaction and wealth, Rizal -- by way of Kahneman -- argued that the two are positively, and quite strongly, correlated. I recalled the Economist wrote two articles on the related issue their 2006 end-year edition. According to those articles, the positive correlation between happiness and affluence is true, but the relationship seems to be non-linear, with a negative second derivative.

Said the first article:

Happiness, as measured by national surveys, has hardly changed over 50 years. The rich are generally happier than the poor, but rich countries do not get happier as they get richer. The Japanese are much better off now than in 1950, but the proportion who say they are "very happy" has not budged. Americans too have remained much as Alexis de Tocqueville found them in the 19th century: So many lucky men, restless in the midst of abundance."

And why is that so? Here's the explanation in the second article:

The science of happiness offers two explanations for the paradox. Capitalism, it notes, is adept at turning luxuries into necessities—bringing to the masses what the elites have always enjoyed. But the flip side of this genius is that people come to take for granted things they once coveted from afar. Frills they never thought they could have become essentials that they cannot do without. People are stuck on a treadmill: as they achieve a better standard of living, they become inured to its pleasures.

Capitalism's ability to take things downmarket also has its limits. Many of the things people most prize—such as the top jobs, the best education, or an exclusive home address—are luxuries by necessity. An elite schooling, for example, ceases to be so if it is provided to everyone. These "positional goods", as they are called, are in fixed supply: you can enjoy them only if others do not. The amount of money and effort required to grab them depends on how much your rivals are putting in.

I remember an old friend used to say, "The rich may not necessarily be happy. But the poor are definitely not." Well, apparently he's not wrong.

That may explain why some people still seems to think that we Indonesians are not better off than 20-30 years ago, while the truth is we are better off in absolute term. In relative terms, i.e. how do one compare with the others, well, of course it's relative.

P.S. This is interesting. Bre Redana of Kompas praised today's Hanoi, which he described as the portrait of Jakarta in the early eighties, as much better than today's Jakarta (also today's Indonesia). The reason, he implied, was the "spirit of socialism." Read here and here. Ironically, Kompas is the most obvious product of capitalism, of course.