Prof. Dan Ariely: Economic improvement without psychological perspective won’t help

Professor Dan Ariely, the James B. Duke Professor of Psychology and Behavioral Economics, currently teaches at Duke University and is the author of the bestsellers Predictably Irrational and The Upside of  Irrationality. His  TEDx lectures have over 12 million views and counting. Prof Ariely is the founder of The Centre for Advanced  Hindsight.  His work has been featured in a variety of media including The New York Times,  Wall Street Journal, Washington Post, Boston Globe, Business 2.0, Scientific American,  Science and CNN.  I can say much more, but I am sure if interested, you would follow the links and educate your self-serves, as prof Ariely is truely impressive. Enjoy the interview. 

Professor Ariely, Bulgaria has been ranked the most unsatisfied country in the EU* according to Eurostat and amongst the saddest countries in the world according to the UN World Happiness Report. Shall we start with what is the difference between happiness and satisfaction?
Satisfaction is not equal to happiness. Happiness is often what we think about – sitting on the sofa or watching a movie, drinking beer, watching the sunset or something like that. Where satisfaction can actually be very painful. You can be satisfied by overcoming challenges, barriers, climbing a mountain, helping someone in need, giving your own money away to somebody else, which is often not about happiness but it is about satisfaction. So satisfaction is a deeper sense of achievement.

How are the satisfaction factors comparing to one another in different economic systems/countries?
I don’t know the answer to that. So, we certainly know that in different countries there is a different role for social commitment and structure of the family; so from that perspective, I would say family is not necessarily about happiness, it is more about satisfaction and to the extent that different countries have very different social structure it would also reflect in that.

Is happiness on a national and a personal level two different kinds of happiness?
When we think about national happiness, mostly people think about an aggregate of individual happiness. So if you have a group of people where some people are really happy and some people are really miserable, do you want to think of this country as being average? And I think that probably not because I think the human capacity for misery is very, very high. Which means that if we have a country where people are at the bottom, we should be very careful about that because the amount of misery could be very, very high. So I wouldn’t only look at the average across countries, I would look at how many people do they have at the bottom of the happiness scale.

What is the correlation between economy and satisfaction?
So, the correlation between GDP for example and happiness, which is what’s been studied, is not very high. Within a country people who have more money up to some degree are happier than people who have less money, but that is because they can see the relative evaluation. But by the way, even within those countries, money buys people happiness up to some degree.

To what extent is happiness dependent on financial stability?
I think it is. Happiness depends less on how much you have but more on stability. For example, if people lose their jobs, this shock in the system that says something that you thought was stable and available and always there, is no longer there – this is very, very hard to deal with. In general actually, uncertainty is something that people don’t deal well with and react very badly to those cases.

What are the socio-economic factors that lead to an epidemic national dissatisfaction?
I think it’s the uncertainty. The financial crisis in the US was one of those things when all of a sudden there was real uncertainty – people did what they thought they were supposed to do, they saved in a way that they thought they should save and all of a sudden they realised this was not the case, that things were very, very different in nature. Other things that can create dissatisfaction is civic unrest, the moment you have a country where there’s more crime, more unhappiness, people are jealous of each other…

Which should come first – economic or behavioural (psychological) change for improvement?
Well, I think we certainly need economic improvement, but we also need behavioural improvement. Any economic improvement that would not come from a psychological perspective though is not going to be helpful. For example, the financial recovery of the market after 2008 has been quite substantial but the damage to trust has not been regained yet. So we cannot think of them separately, we cannot think about an economic system without thinking about psychology. Lots of people don’t trust the banks anymore. So, the banks are doing very well now, but the people who lost trust in the banking system took their money out very early and they haven’t trusted the banks yet. And because of that, it’s been very devastating for them (for the banks). So we can’t really separate behavioural and economic this way.

What would be a working self-help tip for a nation to tackle depression – economic and psychological?
So, very much in the spirit of what we said earlier, it’s about the feeling of control. It’s about the feeling that you do the things that you are supposed to be doing, the things that people told you you should be doing – then things will work out in a way that you’ve been expecting. And then, of course, there is trust. The trust is an incredibly important building block for society. A society where people trust and support each other develops and evolves much better than a society where people don’t. So those will the two incredibly important ingredients.


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