While finishing off the fourth chapter of my book (in which I explore the links between happiness and grades) I came across an interesting academic paper written by Nattavudh Powdthavee, a socio-economist at the University of York. The paper is titled, ‘Putting a Price Tag on Friends, Relatives and Neighbours’ and in it, Powdthavee uses a method called shadow pricing to assign monetary values to a number of social phenomenon.

Shadow Pricing Explained

How does shadow pricing work? The statistical maths behind it is a little complicated but the basic idea can be illustrated with the following example: Let’s say you are earning £10,000 a year. At this point you may rate your happiness to be a six, on a scale of one to ten. However, the following year you get promoted and your salary is increased to £30,000. When you are asked how happy you are, you now reply with a happiness rating of eight. Assuming nothing else contributed to your happiness, one could infer that to increase your happiness by two points you require £20,000. Now, what if in another situation instead of an increase in salary, you got married and your happiness did also move from six to eight. One could then infer that the shadow price of marriage is £20,000.

Powdthavee’s methadology is more sophisticated than my example implies, and uses data from the British Household Panel Survery, which includes over 10,000 randomly selected individuals. What you get from such enormous data are estimates and valuations which are eye-opening. Powdthavee estimates, for instance, that if you move from seeing your friends or relatives less than once a month to seeing them on most days (more than twice a week), your life satisfaction could improve just as much as if you were handed £85,000!

What is the significance of this number? And why should we put ‘price-tags’ on friends? Well, for one, this figure is a reminder of how important it is to have a healthy social life if you want to be happy (and don’t forget, happy people often outperform sad people in a number of fields, including education). Secondly, such estimates can help with decision making. For example, when you graduate you might be faced with the dilemma of choosing between a high-paying job which requires you to relocate far away from your friends and relatives, and a lower-paying job nearer home. But with a monetary estimate of how much your social life is worth, you can make better-informed decisions in situations such as these.

Here are few other interesting estimates in Powdthavee’s paper (the reds are negative values):

• Seeing friends/relatives once or twice a month: £57,500
• Seeing friends/relatives once or twice a week: £69,500
• Seeing friends/relatives on most days: £85,500
• Marriage: £50,500
• Living as a couple: £82,500
• Unemployed: £143,000

My favorite positive psychology study is one published in Science by Liz Dunn and her colleagues at UBC. They found that people who spent their salary bonuses on other people were happier than those who spent it on themselves. And they did an experiment in which they gave students five dollars or twenty dollars and instructed them to either spend the money on themselves or on someone else. Like rational economists, other students guessed that it would make people happiest to get the larger amount and to spend it on themselves. But that is not what happened. Instead, the students were happiest when they bought someone else a gift, regardless of the amount. These findings are part of a heartening wave of new research suggesting that human beings are chock-full of mechanisms designed to make us feel good when we cement our bonds with those around us.

Excerpt from Sex, Murder, and the Meaning of Life by Douglas T. Kenrick

Random fact: just by smiling now you can alter your emotional state; try it. The effect is called affective inference (or facial feedback theory). This is where the physical changes the mental. So it ain’t always about mind over matter, sometimes it’s about matter over mind.

Two friends are hiking in the woods and come to a river. They take off their shoes and clothes and go for a swim. As they come out of the water, they spot a hungry bear that immediately starts to run toward them. One of the men flees immediately, but the other pauses to put on his shoes. The first man screams at the second, “Why are you putting on your shoes? They won’t help you outrun the bear!” To which the second man calmly responds: “I don’t need to outrun the bear; I just need to outrun you.”

Excerpt from Connected by Nicholas Christakis & James Fowler

Before you complain about not succeeding ask yourself how many times you have actually tried and failed. If this number is less than 100 then you don’t want it bad enough. Remember success is also numbers game.

You’re more attractive if you’re already in a relationship. You’re more employable if you already got a job. In fact you’ll make a lot more money once you have lots of money. It seems to me that in life, all you have to do is make a name for yourself just a few times before you can take advantage of the snowball effect of success. You can then sit back and reel in opportunities that feed off of each other.

This prediction error works as follows. You are about to buy a new car. It is going to change your life, elevate your status, and make your commute a vacation. It is so quiet that you can hardly tell if the engine is on, so you can listen to Rachmaninoff’s nocturnes on the highway. This new car will bring you to a permanently elevated plateau of contentment. People will think, Hey, he has a great car, every time they see you. Yet you forget that the last time you bought a car, you also had the same expectations. You do not anticipate that the effect of the new car will eventually wane and that you will revert to the initial condition, as you did last time. A few weeks after you drive your new car out of the showroom, it will become dull. If you had expected this, you probably would not have bought it.

Excerpt from The Black Swan by Nassim Nicholas Taleb.