Musings on Entrepreneurship and Innovation
Sunday, August 08, 2004
Context, Consumption and Happiness
In a recent journal article titled How Not to Buy Happiness, economist Robert Frank makes the following assertions:
[B]eyond some point, across-the-board increases in spending on many types of material goods do not produce any lasting increment in subjective well-being...
[T]he evidence suggests that subjective well-being will be higher in the society with a greater balance of inconspicuous consumption.
In Frank's framework, conspicuous consumption includes spending on big houses, luxury cars, and fancy clothing. Inconspicuous consumption includes "freedom from traffic congestion, time with family and friends, vacation time, and a variety of favorable job characteristics" in addition to higher air quality, more urban parkland, cleaner drinking water, a reduction in violent crime, and more medical research that would reduce premature death.
Professor Frank goes on to ask, "If we could all live healthier, longer, and more satisfying lives by simply changing our spending patterns, why haven't we done that? His answer, as I understand it, is that (a) consumption spending decisions are made within the social context of our peers and (b) conspicuous consumption is more sensitive to context, which leads to a consumption "arms race" that absorbs increases in our wealth without raising our average level of happiness.
I'm more than a little skeptical of the efficacy of happiness surveys. Nevertheless, Frank's description has intuitive appeal . As an aspiring banker and venture capitalist in Dallas, I felt the subtle, but nevertheless pervasive, pressure to conform to a norm that emphasized conscpicuous consumption in the form of leased Mercedes and 4,000 square foot homes in Plano. (Nevertheless, that didn't stop me from driving a VW and living in an apartment.) One of the appealing aspects of moving to Bozeman, Montana was escaping the arms race of conspicuous consumption in favor of a non-existent commute, beautiful landscapes, clean air, and plentiful recreational opportunities to share with my children. (That didn't, however, stop me from buying a home and an Audi after I got here.)
In his new book, Life 2.0: How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness, Forbes publisher Rich Karlgaard frequently notes the "status competitions" that increase the cost of maintaining a professional lifestyle in coastal urban centers. In Karlgaard's experience, a significant number of people are choosing to shift their consumption patterns by changing their context. In other words, they are moving. Some, in fact, are shortening their commutes, spending more time with their families, and living in larger homes. They tell Rich that they are happier.
I believe that Frank is right in noting that decisions regarding important economic goods are influenced by our social context. That's not to say, though, that context determines our choices. I also believe that the effective range of choice has improved. Karlgaard's message to coastal urban professionals is that there are viable alternatives. No matter what mix of conspicuous and inconspicuous consumption makes you happy, you are increasingly able to find it across a broader geography.
 Some aren't too enamored with Professor Frank's analysis (for example). I gather than Frank has made some policy prescriptions including a consumption tax, which doesn't sit well with those who are dubious that government can, or should, save us from ourselves.