The economy and well-being
An enduring question within subjective well-being research is will more money improve our well-being or buy us any happiness? Much of my own research has centred on understanding why, in spite of substantial evidence to suggest that money is relatively unimportant for our well-being we still act and behave as if it is important. Our mental and physical health, having stable work environments, social relationships, and our personalities, are much more strongly linked to higher well-being, but are we sacrificing these for higher incomes?
I have expressed some of my views on the money-wellbeing debate in the popular press. These views are based on my own academic research which has specifically shown that:
- Income losses are generally more strongly related to changes in well-being than income gains (download loss aversion paper) and this is more so for conscientious individuals (download conscientiousness moderates loss aversion paper).
- How our income ranks among others is more important for life satisfaction than our absolute income (download income rank and happiness paper). We’ve shown the same effect across a range of well-being indicators, including: mental health and physical health outcomes (download income rank and mental health paper and for physical health).
- The link between money and happiness is weakest in regions/countries with high income inequality (download paper on inequality moderates income-happiness link).
- Factors such as personality are just as likely to change as income, and other economic factors, yet more strongly associate with changes in well-being (download personality change links to wellbeing change).
- It is considerably more cost-effective to alleviate psychological distress through psychological therapy than with monetary compensation (download mental health versus money paper).
- The influence of an income change on well-being is likely to be dependent on an individual’s personality (download personality moderates income-happiness link and download conscientiousness moderates income losses).
- Interest rates influence the mental health of those heavily indebted (download interest rates influence mental health).
I have also explored how economic shocks have different and more serious impacts, on segments of the population. Specifically, how central bank interest rates have a negative mental health impact on those heavily indebted (download interest rates influence mental health paper) and that the effects of the Great Recession were concentrated on those that were unemployed, lost income, and were sick/disabled (download Great Recession paper).
Personality and Well-Being
I am also interested in understanding how personality relates to our well-being (see this summary paper of what personality is). Personality is consistently found to be one of the strongest and most consistent predictors of an individual’s well-being yet in economic research, where the focus is largely on how directly observable socio-economic events influence an individual’s well-being in general or on “average”, personality is largely ignored. The focus on the “average” however hides a substantial amount of variation in well-being reactions to these socio-economic events – some people may react positively to life events, whilst others may not. Much of our work has focused on establishing whether personality predicts how an individual might respond and also how personality might change. Specifically we have shown that:
Personality explains well-being changes following major life events:
- Agreeable individuals recover lost life satisfaction following disability. Download disability paper.
- Conscientious individuals experience greater loss aversion with respect to the financial domain. Download conscientiousness moderates loss aversion.
- Conscientious individuals experience larger drops in life satisfaction following unemployment than those that are unconscientious. Download unemployment paper.
- The influence of marriage on life satisfaction depends on personality. Download marriage paper
- The effect of an income change on life satisfaction is dependent upon individual personality. Download personality moderates income-happiness link.
- Personality change takes place following unemployment. Download unemployment influences personality.
- Factors such as personality are just as likely to change as income, and other economic factors, yet more strongly associate with changes in well-being. Download paper 1. Download paper 2. Download paper 3.
- In other aspects of my research I have demonstrated that rather than improve health, as has often been suggested, promotion at work can lead to increased mental stress.
- I have also explored the influence of personality and emotions on environmental preferences. The materials we used in the emotions research can be found here.
- We are also exploring how people underestimate how debilitating mental health can be and how this influences health care spending.