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The Happiness Effect: How Optimism Can Boost the Economy

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 our 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 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 the 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.

Based on Gallup’s findings, we’ve listed the 30 best metro areas for general well-being. Because of the correlation between mood and optimism and economic recovery, these places may find themselves in the best possible position to bounce back economically. And while it’s always fun to compare and contrast, the real lesson here just might be: The more you look on the bright side, the brighter your city’s future could be.

Large Cities (Includes Metro Area and Smaller, Surrounding Cities)

1. Washington, D.C. Metro Area

2. Austin, Texas

3. San Jose, California

4. Seattle, Washington

5. San Francisco, California

6. Minneapolis/St. Paul, Minnesota

7. Boston, Massachusetts

8. San Diego, California

9. Raleigh, North Carolina

10. Hartford, Connecticut

Mid-Size Cities

1. Boulder, Colorado

2. Lincoln, Nebraska

3. Fort Collins, Colorado

4. Provo, Utah

5. Honolulu, Hawaii

6. Madison, Wisconsin

7. Cedar Rapids, Iowa

8. Gainesville, Florida

9. Bridgeport/Stamford, Connecticut

10. Peoria, Illinois

Small Cities

1. Burlington, Vermont

2. Olympia, Washington

3. Bellingham, Washington

4. Bremerton, Washington

5. Topeka, Kansas

6. Barnstable Town, Massachusetts

7. Charlottesville, Virginia

8. Kennewick, Washington

9. Medford, Oregon

10. Amarillo, Texas

This article has been republished with permission from our partner, LearnVest. For more financial and life advice that’s sound, savvy, and actually fun to read, check out:

  • 5 Tips to Save $100 or More in Baggage Fees
  • How Wanting it All Can Make You Unhappy
  • Is it Cheaper to Rent or Buy? The Map
  • Photo courtesy of Stephanie Wesolowski.