Tuesday, 22 July 2008

The Price of Happiness

Recently, some researcher has worked out what salary it requires to be able to live happily in London.

Which makes you wonder how to put a price tag on happiness, how much it is and whether it comes with a 12.5% discretionary service charge for whoever serves it up.

As a matter of fact, when the research was initially published in 2006, the income to guarantee happiness was set at £25k per year. Ironically enough (not in the Alanis Morissette-sense though) it was worked out by a research analyst at an investment bank, most certainly making a multitude of this happiness in an average year.

As it so happened, back then he worked at DrKW (aka the former home of Cityboy) but not soon later quit to take on a - even more certainly - better-paid job at a different bank. He must have perceived his happiness threshold to be slightly higher than what Dresdner had paid him up to this point.

Whilst this kind of research definitely makes for a good headline, it is highly questionable whether there is any validity in it. Asking anyone who makes more than £25k they will certainly testify that they couldn't do with this amount of money, and would unlikely be happy with it.

It is folklore knowledge that lifestyles evolve with rising salaries and people get accustomed to certain treats they start to, if not take them for granted, at least appreciate enough not to be willing to give them up. Weekend breaks, dinners out, other indulgences add up, and, whilst not essential, rank as nice to haves, and - the longer you had them - difficult to do without.

As an upper bound (which very few ever get to) there seems to be a level at which the marginal increase in happiness of any further pound of income is too small to make an effort for.

On the other side, there is clearly a minimum to cover essentials such as food, shelter and clothing (and it is worth keeping in mind that out of 6bn people on this planet, a lot do not even cover this).

And somewhere inbetween, there is a level for everybody to work out what they require to be "happy".

Maybe the current financial market crisis will cause some people to find out that they are able to be happy with less than the 7-digit sums they bagged in the recent fat years.

When lamenting that this year's bonus might turn out to be as desastrous as everybody perceives it to be, it is maybe worth keeping in mind what a friend of mine once told me (although it being a bit grim)

Very few people demand on their deathbed to be shown their Ferrari again, but they want to see the people they love.
And if you are thinking to yourself that you would in fact in this situation request your Testarossa to be shown, you probably still think you can put a price on happiness.

And it's very likely you think it's more than £25k.