Happinomics

I'm no economist. Not even close. But seeing how the world works, it makes sense for me to have an economic theory of my own. Everybody else has one.
The businessman who tries to maximize profits has one. The politician who spends time, effort and money on his campaign in order to garner more votes does too. The religious leader who uses prayers and piety as a bargaining tool between God and his followers does as well. Even the kid who barters his red candy for a blue one because he has too many red ones has his own economic theory.
While there at least are many theories as there are people, most of them are in a subconscious level. (I think there are a lot more theories than people, because many people have different theories for different commodities and for the same commodity under different circumstances. I could go on about this with examples, but that is better left for another time.) We do not think about all the pros and cons of our decisions, nor can we. But we are driven by incentives, and we should realize what our current incentives are.
Which brings me to my current theme. "Happiness Economics" is a fairly new growth in terms of econoic studies. Quantifying happiness is very difficult, because it is a subjective thing. The 0 to 10 scale is a commonly used tool in this field, mainly because we tend to think in the base ten numeric system.
[0-10 scale:: It is also used in quantifying other subjective things, eg. severity of pain and the apparent beauty of a person of the opposite gender. It is easy to assess by telling the people to raise the number of digits(fingers and thumbs) on their hands that they feel quantifies their happiness. The happiest folks will give you two high fives, and the least happy ones will five you two closed fists. But, some people who are extremely not happy may raise two middle digits at this idea. And while it suggests that someone who has lost a finger or two on their hand can never be as happy as someone who has all their digits intact can be (which might be the case, studies have shown unhappiness increases with loss of body parts), it also suggests that people with polydactyly (extra fingers and/or toes) should be on average, happier than their normal conterparts(not yet verified by studies).]


My economic theory, so far, is based mainly on "Happinomics", an idea that a person tries to achieve an economic state that will maximize both profits(monetary/material/social/spiritual- whatever may be relevant to the case) and happiness. If something is profitable but makes you unhappy, you are unlikely to try to achieve it, unless you belive that the profit may lead to happiness later on, that outweighs or at least balances your current unhappiness.

Happiness achieved by any trade-off is dependent on the initial expectations and how the final outcome measures in comparison to it. Let us take a hypothetical example of a character (Since the character is not a real one, it is a phantom. Let us give him a generic name- Jack. We may call him Jack Phantom.) who makes a trade-off of a certain units of currency (Let us assume 100 UCs) in any venture and would be reasonably satisfied (5 on a scale of 10) if he only got his investment back. Let us also assume that 100 UCs is not his life's savings, because Jack would be a real bad investor if he invested all his savings in a venture where he would be happy if he broke even.
Assuming it is a reasonable amount to him but not too high he might be at level 6 if he made 1% profit and at level 4 if he made 1% of loss. But he would not reach a level 10 if he made 5% profit. That is because happiness on returns is more of a logarithmic scale. He would more likely be at level 7 if he made 10% profit and at level 8 if he got back double of what he invested. Also, for the sake of symmetry,  he would be at level 3 at 10% loss and at level 2 at a 100% loss (all his investment down the drain). Bad?
It could be worse. If his investment is deemed illegal and he is fined much more than what he invested, he could go down even lower. The same could be the case if the investment seems to fe failing and he has to "throw in good money after  bad" in order to reclaim his 100UCs but all the money goes down the drain. However, the investment could also make huge profits. If his 100UCs of shares skyrocket to  five thousand UCs in value(50 times), he could easily be at level 9 or higher.

Let us assume another scenario. Perhaps Jack had invested with expectations for profit. If he would be at level 5 with 1% profit, his happiness levels for different levels of returns would be more like the chart below (forgive me if it looks shabby, it was done in haste with a basic image editor). Even if it grows a hundred times to ten thousand UCs, he would be only at level 8 (where he would be at with 100% profit in the above scenario).

Another scenario might see Mr. Phantom investing his money into a failing business venture of a close friend or family member. He is reasonably satisfied (level 5) if he loses 1-2% of his investment as long as the venture is salvaged. Here, kinship and trust mean more to him in terms of happiness than profit. If he breaks even, he will be closer to level 6 and even a loss of more than 10% will only have him at level 4. Even if he loses all 100 UCs, he will be around level 3.5 (again, see the shabby chart below).

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Of course, the examples and the charts above are oversimplifications. But the trends are there, and the message is clear. Before investing resources (time, money, effort, love) on any venture, it is worthwhile to consider future happiness. It is useful to have modest expectations that you would be happy with. If you invest in something you are initially unhappy about, you are far more likely to hope for higher returns, which, even if reached, will not make you any happier. However, if you do not reach these high expectations, you may end up being miserable.

On the other hand, if you invest in something that makes you happy even if you get back a little less than what you put in, you stand to benefit from extreme happiness if the venture succeeds. It pays to put your money (time/effort/resources) where your heart is.

Know thy desire

Humans are creatures of thought. We think in order to formulate a method of getting what we want. And unless you are still struggling to find food, water and shelter (in which case I highly recommend not reading the rest of this article, as it will not add any survival value to your life), you have aspirations that far exceed what other animals would be content with. These desires are what make us all human. There are various fields in which we have these desires. And, these desires are what describe our outlook on life, as well as how happy we percieve ourselves to be.

We are social animals. Yet, as individuals, we are far separated from each other. Aspirations differ for each and every one of us. That is the reason the human world is so diverse, with so many commodities being traded and so many thoughts being shared. We are all consumers of the global commodity market and of the global thinking network. Our ideas are shaped by the things around us and the feelings within us. Yet, we do not often comprehend the core things we want, leading us to wander the market of goods and the market of ideas, looking for another thing that we think we desire.

We all have physical, intellectual, emotional, material and social needs, which are necessary to survive. But, we also have wants in each of these fields, which usually exceed the basic needs. Wants vary from person to person. You might want a well toned bodybuilder physique, while I might be satisfied with being able to walk a few miles at a time. You may intellectually want to always be on the right side of debates or you may be satisfied by the learning experience the discussion provided. You may want to be loved and cared for, or you may just want to be left alone. You may want a bicycle, or you may aspire for a Lamborghini Gallardo or a LearJet. You may want to be socially accepted, to be socially approved, to be socially respected, socially connected or socially famous, each of which are different things.

The problem with many of us is that we do not try to identify our real wants, so we cannot be truly happy. We strive for things that others want us or even themselves to achieve, not really knowing if that is a part of our own desire-system. It is like drinking a coffee when your friend is doing so, but when you yourself would rather have a soda. Or vice versa.

While the occasional forfeiture of one's desires in order to fit in might be beneficial in a group of friends, we extend this to other occasions. Friends usually have overlapping value systems, so a temporary forfeiture here and a reciprocation there actually help us achieve emotional and social objectives. But, we should realize that compromise should be reserved to situations where a more important want is favored in place of a less important want. Compromising your beverage is not a drastic compromise, and you may gain insight into your friend's tastes, which can help in the longer term.

But when you forfeit a more important want, it leads to internal discord. If you hate your job but forfeit a chance at a dream vacation you desired since childhood for a business meeting you didn't necessarily have to be a part of, but which might slightly increase your salary, you are essentially compromising something valuable for something not as important. Of course, if missing the meeting might mean losing your job, you should factor in whether you hate the job more than unemployment.

The problem is, we do a lot of things too mechanically. We do not stop to think about how our plans fit in with our wants. We often do not realize what our real wants are, in the first place. If you want to be socially approved, you have to fit in with all the norms of society. However, if you want to be socially acceptable, you can break the ideals a lot of times and get away with it. If you want to be famous, you may have to break many social norms that come your way and even risk being unacceptable to society.

We also need to weigh each desire against desires from other realms. Does your buying a new car mean you'll lose any exercise you currently get? Can that exercise be replaced by another regimen? Will it mean you can visit friends and family that live farther than you normally travel on a weekend? Will the expenses mean you cannot settle down and start a family or go on vacation? You should consider which of these is your priority desire. Your decision should be based on what will make you most happy, not based on what your family, friends, co-workers, neighbors and society as a whole say you should do(unless it is a major emotional and social desire to do what everyone else tells you to do, which might suggest you have a personality disorder).

It takes time, yes. But the time you spend deciding what you really want pays back dividends, often many times over. It helps you get more of the things you want out of life. Most importantly, when you are in your deathbed, you can say to yourself "I did all those things, not because I had to, but because I wanted to." And what is a life better lived, than one in which the decisions were all wanted, rather than forced?

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The writer does not claim to be an expert in any field. He is just sharing his opinions based on his life, the lives around him, a few books and a lot of questions. This is merely his opinion at the current level of knowledge and experience he has.

All ideas and theories expressed here ar subject to change.