One of the things I’ve learned in my study of the happiness literature is that people don’t take enough risks. The evidence seems to indicate that many people would be happier if they quit their job and either went into business for themselves, or found a new job that better matched their individual strengths—even if it is a job that pays significantly less. (You can take a quiz here, at psychologist Martin Seligman’s website, to find out what your signature strengths are.)
Because we are so risk-averse—so wary of experiencing losses—and because we tend to predict that the downside of a risky decision will be bigger than it actually will be, doing what is most likely to make us happy—taking the periodic entrepreneurial gamble—requires a kind of bravery. But that’s just the personal side of the matter. Culturally, we need a climate of opinion that values risk and rewards initiative with respect and praise, reinforcing and encouraging personal courage. Institutionally, we need a flexible labor market that allows us to easily enter and exit new jobs in search of a good match for our interests and strengths, and a system of laws that does not make it difficult and expensive for people to start their own businesses.
This interesting article from Sunday’s Boston Globe about Brett Zaccardi, who dropped out of college to start his own “alternative media and communications agency,” makes this point well, even drawing on psychologist Daniel Gilbert’s work on predicting our future feelings:
When it comes to career schemes, we do not have accurate imaginations about what life will be like for us in different situations, says Daniel Gilbert, professor of psychology and author of ”Stumbling on Happiness.” Our most accurate information about what will make us happy comes from snooping on other people to see if they are happy. And the best way to watch other people is to be in a variety of offices. Gilbert calls the informal process of judging other peoples’ happiness ”surrogation.” He says ”surrogation is the best way to predict if we’ll be happy. Observe how happy people are in different situations.”
. . .
So what do you need to know before you decide? Figure out what was bad about the jobs you’ve had so you don’t duplicate the problem. Then just start testing the waters — put a toe in the current to see how it feels. Then take a leap, and if you don’t like where you land, reframe your landing pad as just a steppingstone. And put your foot in the water again.
”We should have more trust in our own resilience and less confidence in our predictions about how we’ll feel,” Gilbert says. ”We should be a bit more humble and a bit more brave.”
Clearly, this kind of serial toe dipping and steppingstone strolling requires an institutional climate where labor market entry and exit is easy, and where starting a new business is not a huge hassle. The predictable consequence of this kind of openness and dynamism will be a bit of volatility in employment and earnings, but if that’s what it takes, that’s what it takes.
Now, compare this absolutely gob smacking exchange between writer James Traub and Ségolène Royal in Traub’s NYT Magazine profile of the French politician (via Virginia Postrel):
In fact, Royal seems innocent of any taint of economic liberalism. She regards Villepin’s peremptory imposition of the new law as a sign of a systematic failure to listen to ordinary people; but she does not view the national suspicion of market forces as a comparable source of paralysis. I was surprised, I said during our interview, that someone whose entire life constituted a triumph over adversity would join the campaign to insure against précarité….Royal countered my observation with a familiar refrain: “The problem is that everybody isn’t subject to insecurity. Do you see businessmen being fired for incompetence? The young see politicians, who also have a stable and secure job, being civil servants, lecturing others on insecurity. So the young graduate will say, ‘In the name of what am I going to sign an insecure contract?’ ”
Then the conversation took an odd turn. Royal asked me, with the air of someone pulling out a trump card, “Are you in an insecure situation?” Actually, I explained, as a contract writer for this magazine, I have little security.
Royal wasn’t going to be put off the scent that easily. “Yes, but how many years does your contract last?”
“I sign a new one every year.”
Now she was frankly incredulous. “You could be fired every year?” For all her own experience, Royal apparently viewed précarité as a kind of socioeconomic stigma rather than the price you might choose to pay for freedom. Or maybe you could say that for her, as for the left generally–and not only in France–market liberalism and globalization have the status merely of fact, which is categorically inferior to a right. This is no less so if the fact appears to obviate the right. “The global economy shouldn’t be supported by wage earners,” Royal insisted. “They have to be able to build a future, like any human being.”
This is amazing in part because many of us have never had anything but an “at-will” contract, according to which we can be fired any minute. And we should consider ourselves lucky. Societies obsessed with abolishing précarité—the so-called precariousness of dynamic markets—tend to implement rules that lock people into the first career track they set foot in, or lock people (immigrants especially) out of the labor market altogether. Regulatory insulation against employment and wage instability does provide a kind of stability—just not the kind that makes for satisfied lives. You get, on the one hand, stable sub-optimal matches between individual strengths and jobs, since it is difficult under those conditions to dip your toes in lots of different currents. In which case, careers are less likely to be seen as “callings” and work is less likely to be experienced as meaningful and intrinsically satisfying (causing demand for things like six hour work days and six weeks of vacation to go up.) On the other hand, you get stable levels of high unemployment. Studies show that long-term unemployment delivers a big hit to happiness only slightly less toxic than divorce. As it turns out, a little précarité is not simply, as Traub writes “the price you must choose to pay for freedom,” but the price you must pay for happiness.
[Cross-posted from Cato@Liberty.]
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A few comments (best considered separately, at least at first, as they may contradict each other and possibly also my beliefs):
1. Isn’t the welfare state an important part of the solution to this risk aversion? The important thing is that the benefits not be tied to people’s jobs (which makes this part of the French model, where the benefit is the job, especially unpromising). People’s risk aversion in exploring jobs is going to be exacerbated when their health care, retirement savings, and ability to provide for their family (and get their kids a good education) are all highly dependent on their employment. It’s important to look at the potential downside of this risk-taking from the point of view of the people who will actually be faced with these choices, not just at the macro level where we can talk about “volatility”. Government policies that provide a safety net, offer universal benefits, or are forgiving to those in financial difficulty will help encourage risk-taking by softening the blow of failure. They could also encourage risk-taking psychologically, by changing people’s construals of the risks so that they feel more secure and adventurous, confident that things will work out even if this one venture fails (instead of worrying that everything will fall apart).
2. If self-employment makes people happier and more fulfilled, then I guess that’s good in a way, but isn’t it also likely to reduce productivity? We’re talking about people who are failing to take a risk that could bring non-pecuniary benefits due to the joys of autonomy, not risks with potentially lucrative financial benenfits that would bring growth and spread the benefits far and wide. Given the moral imperative of growth, and the billions of people throughout the world whose lives are greatly improved by the growth generated in advanced, productive societies, I wonder about the morality of encouraging individuals to find their “calling” so that they can be happy. (This is more of a “Bral” point, but I’d prefer a Will response to a Liam response.)
3. Is the problem that people are too risk averse, or is it just that people aren’t taking the right kinds of risks? There are plenty of ways in which people engage in excessively risky behavior, arguably: buying lottery tickets, not wearing seatbelts, not saving enough for retirement, and buying housing with interest-only loans. An alternative psychological explanation, which also applies to many of those examples of excessive risk-seeking, is that people are neglecting or underweighting the future. Within, say, a one-year time frame, these kinds of risky business ventures usually don’t make much sense. The negative risk is concentrated in short-term failure, while the positive value comes their chance of becoming fulfilling jobs for many years.
A few comments (best considered separately, at least at first, as they may contradict each other and possibly also my beliefs):
1. Isn’t the welfare state an important part of the solution to this risk aversion? The important thing is that the benefits not be tied to people’s jobs (which makes this part of the French model, where the benefit is the job, especially unpromising). People’s risk aversion in exploring jobs is going to be exacerbated when their health care, retirement savings, and ability to provide for their family (and get their kids a good education) are all highly dependent on their employment. It’s important to look at the potential downside of this risk-taking from the point of view of the people who will actually be faced with these choices, not just at the macro level where we can talk about “volatility”. Government policies that provide a safety net, offer universal benefits, or are forgiving to those in financial difficulty will help encourage risk-taking by softening the blow of failure. They could also encourage risk-taking psychologically, by changing people’s construals of the risks so that they feel more secure and adventurous, confident that things will work out even if this one venture fails (instead of worrying that everything will fall apart).
2. If self-employment makes people happier and more fulfilled, then I guess that’s good in a way, but isn’t it also likely to reduce productivity? We’re talking about people who are failing to take a risk that could bring non-pecuniary benefits due to the joys of autonomy, not risks with potentially lucrative financial benenfits that would bring growth and spread the benefits far and wide. Given the moral imperative of growth, and the billions of people throughout the world whose lives are greatly improved by the growth generated in advanced, productive societies, I wonder about the morality of encouraging individuals to find their “calling” so that they can be happy. (This is more of a “Bral” point, but I’d prefer a Will response to a Liam response.)
3. Is the problem that people are too risk averse, or is it just that people aren’t taking the right kinds of risks? There are plenty of ways in which people engage in excessively risky behavior, arguably: buying lottery tickets, not wearing seatbelts, not saving enough for retirement, and buying housing with interest-only loans. An alternative psychological explanation, which also applies to many of those examples of excessive risk-seeking, is that people are neglecting or underweighting the future. Within, say, a one-year time frame, these kinds of risky business ventures usually don’t make much sense. The negative risk is concentrated in short-term failure, while the positive value comes their chance of becoming fulfilling jobs for many years.
I thought you might like this, which I culled from Garrison Keilor’s Writers’ Almanac on Honoré de Balzac: “All happiness depends on courage and work.”
Keep up the good work, mate. Just lay off the evolutionary psychology. I thought Ed Crane was against it, at least in the early 1990s when his friend Charles Murrary was working on his now notorious book with R.J. Herrnstein.
Perhaps your being the Robert Wright of the Cato Institute is a sign of things to come.
I thought you might like this, which I culled from Garrison Keilor’s Writers’ Almanac on Honoré de Balzac: “All happiness depends on courage and work.”
Keep up the good work, mate. Just lay off the evolutionary psychology. I thought Ed Crane was against it, at least in the early 1990s when his friend Charles Murrary was working on his now notorious book with R.J. Herrnstein.
Perhaps your being the Robert Wright of the Cato Institute is a sign of things to come.
You’ll appreciate this: http://www.hs.fi/english/article/Nokia%E2%80%99s+Ollila+calls+for+more+financial+risk-taking+in+Finland/1135219954572
Outgoing Finnish CEO and president of Nokkia says his country needs more economic risk-taking. Important to say in a country that overly embraces security.
You’ll appreciate this: http://www.hs.fi/english/article/Nokia%E2%80%99s+Ollila+calls+for+more+financial+risk-taking+in+Finland/1135219954572
Outgoing Finnish CEO and president of Nokkia says his country needs more economic risk-taking. Important to say in a country that overly embraces security.