Saturday, December 23, 2006

Work, happiness, and wealth...

I have been studying the economics of happiness for a few years. Thanks to the proliferation of fMRI machines in hospitals in the US, brain researchers can now verify what economists and psychologists deduced from behavior.

Or dispute them.

As America pushes back the frontiers of national wealth, more than a few people are asking "Is That All There Is?" in the face of unparalleled prosperity. This phenomenon has omens for agriculture in the US.

We are, I believe embarking on a few years of infrequent prosperity for many in farming. (For those who invested in an ethanol plant 2+ years ago this time has arrived) Anyone who has been "spreadsheeting" a budget for 2007 and has fooled around with numbers like $3.50 for corn has had a hallelujah moment. The question is begged, however, "Will this make me happier?"

Farmers love the work of farming. That is problem #1. As a rule, nobody has to pay you to do things you love to do.
If people are determined to pursue their calling rather than simply taking a job, some professions (surgery, cookery, genetics) may become overcrowded, others undersubscribed. But when a job cannot find enough takers, the market finds ways to ennoble it: first pay, and then status, begin to rise. It becomes economical to automate some aspects of the work, employing machines to do the deadening humdrum toil that men and women are no longer willing to put up with. What remains of the job will be the bits only people can do: tasks that require insight, ingenuity and the human touch. Ms McCloskey recalls the Cincinnati sewerman, interviewed a few years ago on National Public Radio, who earned $60,000 a year and liked to tell girls he was an “environmental” worker. [More]

Happiness is not so easily captured, nor is self-interest the sole undergirding principle of economic activity it seems. And wealth alone does not provide all the answers to being happy. Even Adam Smith - that old capitalist dog - puzzled over this.
"In what constitutes the real happiness of human life, [the poor] are in no respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar, who suns himself by the side of the highway, possesses that security which kings fight for."
Many farmers will experience a true upsurge in happiness as money worries lessen. But unless we have evolved significantly in the past decade or so, it will not last.

First, we have individual setpoints for happiness that are hard to alter.
Recent research conducted by Daniel Gilbert (a professor of psychology at Harvard) and others has unearthed several new elements about the business of happiness as concerns humans. The first element being that the major events of our lives have a minimal effect on our overall long-term happiness. Did you get married this year, or not? Have you been involved in a war lately or a victim of a crime? Regardless as to your answer, it is a fair bet that your happiness will be more or less the same in the long term. The latter could be understood if you accept that the brain has a mechanism of sorts to reset people back to their baseline happiness over time. The second element of happiness is the terrible truth that we are awful at predicting what will give us happiness. Do you expect that a new car or home will give you happiness? Certainly it will, just not as much as you expect. The same is true in the opposite. Do you think that getting rejected by your crush or losing a game will make you unhappy? It will, just not as much as you expect. [More]

Second, much of our happiness derives from status - our position relative to our peers and neighbors. This shows up as reference anxiety or pursuing positional goods. Our brains were wired to care about status, and despite protests to the contrary most of us do. As our neighbors experience similar good results, our success will likely pall.

Finally, we are competitors, and as such have a history of bidding up inputs (especially land) when our income goes up. We are agents of our own undoing.
Federal payments put money in farmers' pockets, which they used to bid up land prices to as much as three times its production value, Lines said. Prime Ohio farmland is valued at $2,500-3,000 per acre, compared to its productive worth of about $1,000 per acre, Lines said. [More drivel from 2001 here]
[Side note - I take a perverse pleasure in pointing out all those who called farmers fools for buying land at "inflated prices". No investment is more profitable for producers than to own the land. It has always been thus and those of you who took the challenge are being rewarded. One more point: never take risk advice from someone on tenure]

So if we view this as a window for changes that could make us happier, how can we maximize our outcome? Funny you should ask, because that is just what my presentation will address at the Top Producer Seminar in Chicago.

I can't wait to hear what I'm going to say!

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