The Thrift Paradox: U.S. Savers May Be Happier, but the Economy Suffers

Consumer spending—or more precisely, the lack of it—continues to hamper the U.S. economy as Americans reconsider what it takes to make them happy.

This thrift paradox has become increasingly apparent as Americans, after their earlier decades of spending and indebtedness, have gotten into the habit of saving their money to the detriment of national growth, according to a recent report from Harris Private Bank.

At the same time, the “economics of happiness” suggests that the relationship of income and wealth to well-being is more complex than economic policymakers have traditionally assumed it to be, Federal Reserve Chairman Ben Bernanke noted Monday in a speech before the International Association for Research in Income and Wealth in Cambridge, Mass.

Exclusive attention to aggregate numbers, without considering factors such as people’s sense of belonging to a community and the level of optimism about their future, paints an incomplete picture of what many individuals experience, Bernanke said.

In short, it looks like post-recession Americans have truly learned that money doesn’t buy happiness.

“An interesting finding in the literature is that the overwhelming majority of people in the United States and in many other countries report being very happy or pretty happy on a daily basis, a finding that researchers link to people’s intrinsic abilities to adapt and find satisfaction in their lives even in very difficult circumstances,” Bernanke said.

At the same time, however, the Fed chairman did acknowledge that many Americans are struggling and not too happy about their finances.