Will austerity make us happier?

Smiling all the way to the bank Karl Rabeder is happy, he’s giving away his £3m fortune and plans to have nothing left. His conviction: I had the feeling I was working as a slave for things that I did not wish for or need. Is a growing meme, picked up by the novelist John Lanchester (and UK blogger Monevator). Money didn’t bring Lanchester’s father happiness, he worked in a career he hated for 30 years. His grandfather went to the Far East in search of riches, but never fully recovered from 4 years in a prisoner of war camp. Both men died young, which inspired Lanchester to live for the day and advise his readers not to: ... listen to what people say about freedom and security and money but, instead, look at the specific, actual bargains they are making with their lives. Financial analyst James Montier dug into the research on happiness in Behavioural Investing, to discover that beyond a certain point money doesn’t buy happiness. An increase in income quickly becomes the new normal, a process known as ‘hedonic adaption’. According to research quoted by Montier people who pursue materialistic goals are: ...1.37 times more likely to have attention deficit disorder, 1.6 times more likely to be paranoid, 1.6 times more likely to histrionic, 1.5 times more likely to be borderline [sic], 1.5 times more likely to be more narcissistic, and 1.8 times more likely to have dependency issues! Attention deficit disorder, histrionics, narcissism – he could be describing the stereotypical investment banker... Lanchester’s father was a banker, which is, perhaps, one of the reasons the novelist felt able to write Whoops! a non-fiction book about the financial crisis. Judging by an excerpt in the FT, he doesn’t spare the investment bankers, the so-called masters of the universe who sound at least 1.5 times as narcissistic as your average bloke: If you go to work with money, and make money, you can be proved right in the most inhumanly pure way. This is why people who have succeeded in the world of money... seem to regard themselves as paragons of rationality, when others often regard them as slightly nuts... Richard Fuld of Lehman Brothers... was one example. Another was... Sir Fred Goodwin after the meltdown and public rescue of RBS... These were just lurid examples of the insulating bubble of money, and the security of the cult. It wouldn’t matter, if it weren’t for the fact that the psychology of the masters of the universe played a vital role in our journey to this point. One of our culture’s deepest held beliefs is expressed in the question, “If you’re so smart why ain’t you rich?” But people in finance are rich – so it logically follows that everything they choose to do must be smart. That was the syllogism followed by too many people in the money business. Now their collective madness (and that of politicians, regulators, shareholders, property flippers etc.) seems likely to bring a period of austerity upon us, and maybe in embracing it, we’re conditioning ourselves for what lies ahead. But, if less materialism and, as Montier advises, more time spent on relationships, exercise, sex, reflection, working at jobs we enjoy, and sleep, is the new norm, perhaps we’ll be happier for it. At least those of us whose annual incomes don’t sink below the $60,000 per year that behavioural economist Daniel Kahneman says buys happiness. Paul Samuelson, another economist, put a different value on happiness: You know what happiness is: 'Having a little more money than your colleagues.' And that's not so tough in academic life. Perhaps austerity works after all. - A good toilet read The more critical reviews I read of former US Treasury Secretary Hank Paulson’s autobiographical account of the financial crisis, the more I want to read it. Max Abelson: He concedes a fondness for locking himself “in the bathroom with Sports Illustrated to relax in quiet.” He used to speed through his children’s bedtime stories because of his work schedule; one night, his wife, who likes to call him Pea, forced him to read with expression. “No, no!” the kids objected. “Read like a daddy, not a mommy.” Although it’s shocking the man whose job was to dodge financial meltdown was fallible, made policy on the hoof, and can offer little ‘thoughtful analysis’ afterwards, it’s also comforting. Before Paulson was Treasury Secretary, he was master of the universe in chief: chairman and ceo of Goldman Sachs. Despite the power and money, the repeated ‘dry heaving’ he describes, doesn’t sound particularly masterful, and it doesn’t sound like happiness. - Behavioural investing Montier has just published a new book, The Little Book of Behavioural Investing.

Comments

Indeed, money can't buy happiness but at least you can afford to live comfortably. And it's better to be sad and rich than to be sad and poor. Just a thought.

I believe it's all a matter of attitude. If you feel that you are spending your resources (money, time, etc.) in productive activities, if you think you are nurturing your soul doing meaningful ventures, then you can be happy, whether you have the money or not.

Nice post by the way. It makes one think of their lifestyle and priorities. :-)

I want money! Lots and lots of money! Coz I wanna travel the world and experience lots of things and help my family. That will make me happy.

But....

if in case I have lots of it, it's ok. I'm still happy just living my life to the fullest each day.

I think he is going to swap one unhappiness for another, particularly when he's 70 and losing his health, unfortunately - or before as he starts to fret about it.

I admire his pluck, but putting £250,000 in a bank earmarked for later health care costs might have been prudent.

I also think Mr Rabader is being somewhat hasty. If he thinks his current life is meanless then just change the lifestyle. Stop spending money on luxury things and spend it instead on things you think are worthwhile, whether that be charities, causes, art, education, whatever.

The happiness thing can be looked at from the inner/outer scorecard angle. If you're making money just to show everyone else how great you are, and the things you do for the money and the things you do with the money don't actually interest you, then of course you won't be happy.

But if you earn loads of money from doing something you love and you spend that money on things you think are worthwhile, and you don't start thinking you're clever because you've got all this money, then you should be able to be rich and sane at the same time.

[...] Will austerity make him happier? – iii blog [...]

I like the concept of being rich and sane. I believe we all have that capability... to not let money run our lives but to make money work for us and for the betterment of our society as a whole.

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