One of the major areas of study in recent years is the economics of happiness, this area seems to find the correlation between economics, sociology, psychology, and environmental issues. Studies have shown that economics is really concerned with the maximization of scarce resources which literally translates into high consumption of goods and services. Increasing income levels show an increase in utility and this will mean that individuals and society should be happy all other things been equal. Why would people work tirelessly to acquire more income and wealth if it would not make them happier?
The paradox is that, although capitalism has been extremely successful in raising the level of income in several parts of the world and especially in the Western world, evidence emerging suggests that happiness and satisfaction are not increasing for many people in the society. A large number of people are now working longer and intensely now than previously. Unemployment which has been a major cause of the falling level of happiness in society has been improved in many parts of the world but the problem of unhappiness among workers continues to exist.
Two factors among others have been identified in understanding the reason why people do not become happy even with improved levels of income. Firstly, higher consumption and utility make people happier in the short term but it falls when a higher level of consumption soon becomes a norm. For instance, the mobile phone industry exhibits the belief that the next new phone will always be much better than the old one which needs to be replaced often.
Secondly, people seem to adjust their demands based on what others have. It suggests that, if a worker earns an extra percentage that everybody around him earns, his happiness will decrease in view of the fact that the percentage increase in wage is leverage among them. What it means is that consumers derive a large measure of happiness from consuming goods and services with the knowledge that others cannot. Luxuries and pleasure diminish one’s goods and services that fall within the reach of everybody.
It is true that income is very important and richer people might be happier than the poor but other important elements of life are also very important. These factors include philosophy of life, freedom, health, environment among others are all important in the happiness equation.