Does money buy happiness?

Moguls are dreaming up yet more sophisticated objects for the new super-rich to buy

MAYBE MONEY can't buy you love, but perhaps it can buy you happiness. The shop-till-you-drop, "retail therapy" culture may have become more dominant in the last few years, particularly in the US and UK, which have seen seven or eight years of solid consumer growth. But are we really any happier for it?

One person who thinks we are not is Robert Frank, a US economics professor whose new book, Luxury Fever, has been causing a bit of a stir in the States. He believes that we live in an age of "profound waste". The very rich spend their money on Cartier watches, Lexus sports cars, Prada trousers and, at the top of the range, Gulfstream jets. Yet they are still dissatisfied. The world's industrial moguls are dreaming up yet more sophisticated objects for the new super-rich to buy (I heard the other day from a Gulfstream executive that they are looking at a supersonic executive jet that will fly faster than Concorde), to the general detriment of Western societies as a whole.

Of course, there is nothing new in this. A hundred years ago the economist Thorstein Veblen drew attention to the "conspicuous consumption" of the rich, and the social damage it caused. More recently, in the Sixties, the British economic journalist Fred Hirsch identified "positional goods" - goods by their nature rare, such as Impressionist paintings, or a Queen Anne house - and worried about the way in which the rich bid up the prices for them and so add to inflation.

Nevertheless the burst of consumerism in the US, which has pushed the saving rate into negative territory, gives a new bite to these well-rehearsed concerns, which is probably why Professor Frank's book has attracted such attention. His solution, insofar as there is one, falls into two parts. First, we should all try to focus attention more on "inconspicuous consumption", spending time with family and friends, going for walks in the country, being free from traffic congestion, and so on. Second, he believes public policy could help to shift this balance by scrapping income tax and imposing a progressive consumption tax on families: the more they spent in any one year, the higher the tax rate would be. If additional money were raised, it could be used to fund government investment in public goods.

You don't need to buy the whole thesis to feel that there is something a touch distasteful about excesses of consumption. Not many of us would like to see a family consumption tax, particularly if it were used to fund public projects such as the Millennium Dome, but most of us would accept that, despite the enormous rise in living standards of most people in developed countries over the last 40 years, people are not much happier as a result.

This common-sense judgement is supported by academic evidence. Economists now study happiness, trying to measure how happy people are and what makes them happier. Sadly for shopaholics, it seems that "retail therapy" is not particularly effective. It may have some slight effect: Warwick University's Andrew Oswald, a leading authority on the economics of happiness, found that between 1970 and 1990 there was a slight relationship between wealth and happiness. But it seems that it is really only at the very bottom of the income scale that the amount of money people have influences how happy they are. Relative wealth, how rich people are compared with the people round about them, seems to matter more than absolute wealth.

The reaction of many people to this will be to say: "Hold on a moment, how do they know whether people are happy or not?" In fact it is possible to make some measurements, partly by asking people whether they feel happy, but also by measuring things such as stress levels. You can also look at suicide and attempted suicide rates - apparently attempted suicide is much more common than is generally appreciated - and make some judgements from that.

So what do we know about happiness? One of Professor Oswald's latest findings is that in relative terms the young are becoming happier, which is great for the (relatively youthful) readers of this newspaper. Not so good news is the finding that all other groups are becoming less happy. The unemployed tend to be unhappy, which is a powerful moral argument not just for encouraging general economic growth, but also for encouraging people into jobs where possible. And - a particularly troubling finding - it seems that black people are less happy than white people.

Any pointers to policy? If relative wealth were more important than absolute wealth, you might imagine that societies that are more egalitarian are happier than those that are not. But in fact that does not seem to be the case, either here in the UK or elsewhere. Thus international studies suggest that Japanese people are not particularly happy, despite the small income differentials there, while Brazilians are relatively happy despite their very large differentials.

So is there nothing that governments can do to make their citizens happier? Well, there is one very interesting study about to come out, by Professor Bruno Frey, of Zurich University. He has found that the more democracy there is - and remember that Switzerland is strong on that - the happier people become. We cannot do anything about our age or our race, but if we become happier the more democratic control we feel we have, then that is something to hang on to. I suppose devolution could be justified as passing more democracy to Scottish and Welsh people, even if the latter have had a chap imposed on them by Downing Street. Maybe Londoners will feel happier if they can vote for the mayor of their choice. And the way to make the English happier would, I suppose, be to remove Scottish and Welsh MPs from the Westminster Parliament, so that the English, too, would feel they had more control over their affairs. Um...

Given that any individual's control over the level of democracy is minimal, and given that spending money does not seem to bring more happiness, what should we all do to make ourselves happier?

A couple of years ago David Lykken, a psychologist at the University of Minnesota, wrote a book called Happiness, in which he studied a large group of identical twins who had been separated at birth. At the time he concluded that happiness was genetically determined: people were either born happy or not. "Trying to be happier is as futile as trying to be taller."

Now, according to a recent article in The New Yorker, he thinks he was wrong. People still have set points of happiness, but, he believes, they can lift their level of happiness above those points by learning some new habits, such as keeping busy, taking regular exercise and, apparently, getting married.

I'm not sure what his advice would be for people who are already frantically busy, who go to the gym three times a week, who have been married for years, and despite all that are still profoundly miserable. However, put together his view that people can lift their happiness and the evidence that young people are becoming happier, and there may be a clue. We cannot, of course, become any younger, but we can perhaps think younger.

That, plus just a little bit of retail therapy, a few drinks, a few parties... doesn't it sound more fun?