Find Your Happy Place: How Optimism Affects the Economy

By Gabrielle Karol

How do you feel about the economy these days? With unemployment sky-high, the stock market reeling and the recession still visible in our rearview mirrors, it can be easy to feel fiscally blue.

But according to new research, pessimism isn’t the answer. In fact, the happier you are, the quicker the area you call home is likely to recover.

In other words, it’s not just the economy that affects ours moods—it might actually work the other way around, too.

The Economics of Optimism

A recent study by the University of Miami School of Business Administration has shown that in in states where people are more optimistic, an economic recession is weaker, expansion is stronger and recovery faster.

Alok Kumar, one of the study’s researchers and a finance professor at the University of Miami School of Business, measured optimism levels across different U.S. states by looking at three key factors: weather, sports optimism and political optimism. In other words,  warm, sunny weather encourages the release of serotonin in the brain, which makes people alert and cheerful. Additionally, we’re happier when the political party we like is in power and our sports teams are performing well.

After creating an index to measure economic well-being in those same places, the researchers crunched the numbers to reveal the correlation between mood and economic activity. Overall, they found that happier places had higher retail sales, which improves the economic climate and helps lessen the effects of a recession. The results of the study showed that other non-economic factors—like warm weather and good sports teams, which improve happiness and optimism—also helped improve local economy, meaning that your mood (and the mood of your town’s fellow residents) can directly impact your area’s economic outlook.

The Happiest Places in the US of A

Ready to head straight for a town with palm trees and a bang-up baseball team? Don’t pack your bags just yet: It turns out there’s more than one way to measure a geographic sense of good moods. The Gallup Well-Being Index, the most comprehensive ongoing study of happiness in the United States, measures 1,000+ individuals every day on a number of mood-related factors, including life evaluation, emotional health, physical health, healthy behaviors, work behaviors and basic access to needs.