Ed Lotterman: Thanksgiving vs. winter of discontent

December 6, 2013 

On Thanksgiving, nearly everyone says something about all the things they have to be thankful for. On the whole, they are sincere.

Yet a profound collective discontent exists in society right now, not only in our country but also around the globe. We may be well off. Yet there is a pervasive sense that our society is not faring well and that our future is not as bright as we thought it would be in the past.

As individuals, we truly may appreciate how well we have it. However, for us as a society, this is yet another winter of discontent.

Economists have mixed impulses on the topic of human happiness. At one level, we economists assume that the desire to be better off, to be happier, to have more of our needs and wants satisfied, is what drives activity and decision-making. The only real disagreements are about the degree to which such “satisfaction maximization” is driven by rationality or irrationality and on the importance of satisfaction that cannot be quantified in monetary terms.

Beyond those starting points, however, we don’t necessarily go far in terms of happiness in individual humans or collectively for society. But some individual economists, often working off of the research of psychologists, have explored the subject.

One is Richard Easterlin, a researcher I cited recently in terms of the relative incomes of groups of people born in different eras.

In addition to his explanation of “birth and fortune,” Easterlin looked at happiness in different societies, as measured by admittedly imperfect survey techniques. He found that once individuals get beyond a threshold level of income that covers their basic needs and a few luxuries, self-reported happiness does not rise further with income.

The very poor living happily in their hovels may be a myth, especially for those who can’t cover their basic needs. But once the average person or household reaches a comfortable income, happiness tends to plateau. Still, that doesn’t keep most of us from wanting more income.

Another finding by many researchers is that overall happiness with one’s economic situation is a condition of relative experiences.

We can be fairly happy with our situation when it has been improving or even stable. But we hate to have our income decreased by forces beyond our control, reducing our consumption of goods and services. This is true even if the reduction returns only to a level at which we were satisfied just a few years earlier. Backsliding seems to disproportionately affect satisfaction.

We also tend to be content as long as prospects for the future are positive, as long as we have reasonable expectations that our income and consumption will continue to rise, if only a little. But we are highly disappointed if we expect those to fall.

That seems to be a major factor now as millions of households face a future with consumption levels lower than what was expected as recently as 2007. This is particularly true at the age extremes of the labor force.

Those who got out of school after 2007 or who are near retirement seem particularly buffeted by fate. Even those in their 50s who did not lose jobs are realizing that — given prospects for low real interest rates or other investment returns over the foreseeable future — they won’t be as well off in retirement or won’t be able to retire as early as they had assumed.

Prospects of how our offspring will do in life is an important subset of satisfaction based on expectations. Recent immigrants often endure low income and hard work, but are content with their current travail because they believe their struggles will pay off in better lives for their children and grandchildren than would have been the case if they had not immigrated.

A third important relative factor is how we are doing compared to others. This may be relative to those we generally consider our peers or at play in the high-school-reunion phenomenon. It also can be one’s social and economic class relative to another.

The perceptions that those who work with their hands are not doing as well as those who work in offices at computers or that the lifestyle of the middle class has stagnanted compared to the top 1 percent are powerful motivators of discontent.

Another aspect is rooted in the degree to which people understand how much better off they are as opposed to worst-case scenarios. Those old enough to remember the Great Depression tend to be more appreciative of contemporary comforts even in a downturn. Similarly, the cohort of Europeans who remember the danger and deprivation of World War II and its aftermath generally are more tolerant of economic downturns than younger people. This may not bode well for the future of the European Union, which has its roots in a consensus that political and cultural sacrifices are necessary to avoid the horrors of wars in the past.

Those of us who have lived and traveled in very poor countries also tend to be less nettled by relative bad times in our own nation.

Understanding how our emotional reactions to such relative factors condition our level of happiness is not an automatic remedy for contemporary discontents. But they are something to reflect on in this holiday season as we weigh the things for which we are thankful versus those that disappoint us.

Economist Edward Lotterman teaches and writes in St. Paul, Minn. Write him at ed@edlotterman.com.

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