We have been living with the consequences of a worldwide economic calamity for several years now. Unemployment hovers around 9 percent, and underemployment may be twice that. The value of our houses, which many have used to finance current consumption and others expected to finance their retirement, may take a generation to recover. People who counted on endless stock-market growth to compensate for not saving are hurting. And new college graduates face a combination of miserable employment prospects and student-loan obligations that in aggregate now exceed the nation's credit-card debt. Despite the feeble cheerleading that we are on our way out of this morass, there is little reason to believe that things will soon get better, and a real chance, with Europe falling apart and our own government completely dysfunctional, that things will get worse.
We all know the bad news. But is there anything good that can be extracted from all this misery? I certainly don't celebrate our economic suffering, nor do I wish it to continue, but I do think there are potential benefits. They come from two sources: a reduced focus on material success as the measure of all things (because material success has become less likely), and reduced expectations. Why are these benefits? There has been a research boom in recent years on the determinants of well-being, and it shows that material wealth contributes too little to well-being, once incomes are above subsistence, to justify people's efforts. And it shows us that lowered expectations may enable us to derive satisfaction from life events that would have left us disappointed in the boom years.
The role of material success in well-being is an unsettled matter. Some evidence suggests that once people reach a certain income level, increases in wealth contribute almost nothing. Other research suggests that "richer is happier." It's true that rich nations are happier than poor ones, and rich people in a given nation are happier than poor ones. But there is evidence that over a 50-year period, as per-capita gross domestic product more than doubled in the United States and quadrupled in Japan, well-being hardly changed at all. Increases in material wealth do much less for people than they expect. That is, people devote far more time, energy, and worry to wealth than the payoff justifies.
And gains in wealth are especially unhelpful if material success is a person's goal, rather than a byproduct of other motivations. Thus people who want to be wealthier and succeed derive little benefit in well-being, while people who become wealthier by accident do benefit. Researchers have also found that what we do has a bigger effect on well-being than what we have. This is in part because we adapt rapidly to what we have, so that the new car, tablet, or smartphone provides a hedonic kick for a disappointingly short time. This is less true for what we do, perhaps because there is so much variety in activities, especially when they are interpersonal, that adaptation is reduced. Our work is a major source of well-being, as long as the work is meaningful and engaging. So is our network of relations with family, friends, and community organizations.
Thus Freud, who was wrong about most things, may have been right when he said that love and work are the key determinants of happiness.
Given what we know about well-being, an upside of the downturn may be that we'll turn our attention to pursuits that don't take or make money, but that may be more satisfying. Perhaps we'll spend more time with friends and family and less time at the mall. Perhaps we'll spend more time hiking and biking and less time buying. And perhaps fewer of our most talented graduates will seek careers in the financial world. Perhaps they'll choose to solve the world's problems instead of exacerbating them.
But there's a very important caveat: Meaningful, engaging work is crucial to well-being, and unemployment is devastating. In a difficult job market, people will take any job, whether or not it's a good one. And today millions have no job. The suffering caused by the lack of work is incalculable.
Human beings spend a lot of time asking themselves, "How am I doing? How is the job going? How are classes going? How about romance, or friends, or parents? Am I pleased with the stuff I have?" When we ask ourselves questions like those, our answers come from comparisons. It's hard to apply absolute standards to evaluate most aspects of life. So "How am I doing?" becomes "How am I doing compared with ... ?"
Compared with what? There are several answers. We compare ourselves with relevant others (the economist Robert Frank has written several books about this over the years). We compare ourselves today with ourselves yesterday. We compare where we are with where we expected to be. As should be obvious, we like it when we're doing better than our peers, and better than than we were doing yesterday. And we like it when we meet or exceed our expectations.
Here lies the second possible upside to the downturn. When expectations are high, the best we can hope to do is match them. When expectations are lower, matching them is easier and exceeding them is possible. By lowering expectations and keeping expectations modest, the downturn may actually enable people to derive satisfaction from activities and possessions that would previously have been disappointing. Managing expectations is a crucial determinant of well-being, and the downturn may be managing our expectations for us.
Several years ago, I worked with Sheena Iyengar of Columbia University and Rachael E. Wells of Fordham University on a study of college seniors as they looked for jobs. Using a measuring instrument I had helped develop a few years before, we assessed whether each individual was out to get the "best" or was looking for "good enough" (in general, not with respect to jobs). What we found is that people who were out for the best got better jobs—their starting salaries were about 20 percent higher than the salaries of those looking for good-enough jobs.
Nonetheless, by every psychological measure we took, the people looking for the best were less satisfied—with their jobs, with the entire job-search process, and with their lives in general. They were more pessimistic, stressed, tired, anxious, worried, overwhelmed, and depressed. They were more regretful, disappointed, and frustrated. In short, they did better but felt worse. Thus, unrealistically high expectations can be the enemy of well-being. And the downturn, by dialing down expectations, may give people the chance to appreciate good enough instead of longing for the best.
Lowered expectations may also lead college students to feel less entitled than they have in recent years. They may seek what is good about their institution, and be grateful for it, instead of noticing the ways their institution falls short, and resenting it. Aside from making campus life more pleasant, these lowered expectations may actually improve student learning, because there is now research, led by Barbara Fredrickson, a professor of psychology at the University of North Carolina at Chapel Hill, showing that happy people do better work than unhappy ones. And lowered expectations may also take some of the pressure off colleges to be summer camps with libraries, offering their students every recreational opportunity under the sun. This, in turn, may enable colleges to rein in costs, thereby reducing the debt burden with which so many students graduate.
I don't know whether the downturn has lasted long enough to change what people seek out, expect, and aspire to in their lives. And I certainly don't wish on us another decade of suffering. But there are potential benefits, were that to occur. We should try to cultivate and strengthen some of the changes in our expectations and aspirations that the downturn has brought, making them habitual enough that they won't disappear when the economy recovers.