It might seem obvious, but spending time with your friends is a pretty good way to get happy. But, some clever researchers from the University of Milan Bicocca, Italy, have found a way to put a monetary value on time spent with friends.
I hear you ask the question, “why?” Well, I guess in a culture where the economy is everything, it’s sometimes useful to get a sense of the financial value of something, so you can win arguments with politicians (I know this from personal experience). It’s not ideal, but if it’s possible, it can be part of a larger set of tools to aid the development of public policy.
In an article published in 2014, in the Journal of Behavioural and Experimental Economics, Emilio Colombo and Luca Stanca, used data from 103 Italian province capitals to estimate the value of relational life. They used measures such as time spent with friends, and participation in clubs and associations, while controlling for other variables such as weather, environment and socio-economic factors, and came up with a monetary index of quality of life.
Their work was an extension of previous studies that have attempted to put a monetary value on particular life events. So, for example, in 2002 researchers publishing in the International Journal of Epidemiology were able to estimate that being married, relative to being single, brought the same amount of happiness, on average, as having an extra £70,000 ($126,000) of income per annum (if you are interested in the methodology, here’s a link to the article). In 2008, in an article appropriately titled “Putting a Price Tag on Friends, Relatives, and Neighbours”, researchers used a similar approach to determine that a significant increase in social involvement was worth £85,000 ($154,000) (see link for an explanation of what constituted an increase in social involvement). There was no mention of where Facebook friends fitted into the formula; I’m guessing about $1.50 per friend.
In the 2014 Italian study, the researchers used regression analysis (a statistical method that examines how different factors influence increases or decreases in a particular focus variable) and found that people were willing to trade-off a premium in both housing costs and income to live in cities where they would spend more time with friends. In their research they found that a one point increase in the share of those who meet their friends most frequently is worth an extra €1150 ($1660) per year in terms of higher housing costs and foregone wages. They also were able to put a value on factors such as temperature, transport infrastructure and even violent crime (which had a negative value).
So, although we may not be conscious of it, we make all sorts of trade-offs in our lives – even economic ones – to seek out a better life.