Saturday, October 2, 2010

on happiness and Philips curve

I have been on the top of the world, and it felt great. But every time, it was transient. It will be followed by a sudden downfall. I ask myself, can such happiness ever be lasting? The answer is no.
I do not mean that people cannot be happy. Given certain life path, some people are always happy and others not. This as I would call it using an analogy from economics, a natural level of happiness. It is determined by people's attitude towards life, their gratitude versus greed, and their characters.
This description is all about smooth path in life. However, when life present you with a success or something very pleasant, one feels happier than his normal state of happiness. However, this kind of happiness is transient--when that surprise fades or ends, one feels the contrast and feel down--lower than his normal state. One might well postulate, that what if one is always successful, does that make him the happiest person in the world? The answer is no. The key lies in the adaptiveness of our mind, our mind adapts to that frequency of good things, and is no longer "surprised" by success. Just like the Fed can improve the economy by surprising the market with its manipulation of interest rate, but it can not systematically surprise the market. There is a short-term correlation between inflation on the growth rate, but as the market adapt to the higher inflation rate, the growth rate declines to the original level with the higher inflation rate. When the inflation rate declines to its original level, the market enters "depression". Just like high inflation does not place a country on a high-growth path, neither does success or wealth place one on a higher level of happiness.
The question is, in economics, we will not manipulate the inflation to stimulate the economy during normal times, do we then want good surprises in our life?

No comments:

Post a Comment