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What's an M.B.A. Worth in Terms of Happiness?

Posted: 2009-11-16

from Chronicle of Higher Education, Nov. 8, 2009. The author advocates that when ranking MBA programs, U.S. News and its ilk could survey the happiness of applicants and compare it with their happiness levels five, 10, and 20 years after graduation. Likewise, public schools should develop a Happiness Index.

Any sensible person would rather be happy than rich, although many people often confuse the two—business students among them. Those who choose to attend business school on the assumption that an M.B.A. will help them change jobs, make more money, and therefore be happier are very likely misinformed.

Everyone needs enough money to satisfy basic needs, but those are easily met in the salary range that most people occupy before they earn M.B.A. degrees. Studies show that once basic needs are met, more money generates little, if any, additional happiness. Business schools and their students should take a cue from recent research in hedonic psychology—the science of happiness—that suggests a reorientation of purpose rather than a pursuit of more monetary wealth.

For example, Jonathan Haidt, an associate professor of social psychology at the University of Virginia, has found that people who strive primarily for achievement and wealth are less happy, on average, than those whose efforts focus on relationships and intimacy, religion and spirituality, and "generativity"—that is, leaving a legacy and contributing something to society. Haidt's research, as reported in his book The Happiness Hypothesis and elsewhere, indicates that a devotion to helping others is an important path to a meaningful, satisfying life. Spending money on others increases the happiness of most of us more than spending money on ourselves does. When we act kindly toward others, rather than selfishly, reward centers of the brain, where dopamine receptors are located, light up like Christmas trees.

Other studies indicate that people who act ethically tend to be happier than those who do not, suggesting that we are evolutionarily designed to derive pleasure from receiving the approval of others and from doing the "right" thing. Brain scans indicate that when we act consistently with social norms, primary reward centers in the brain are again activated.

People with a strong moral sense even tend to be more prosperous than others, according to Richard Layard, an economist at the London School of Economics and Political Science, in his 2005 book, Happiness: Lessons From a New Science. It seems that doing the right thing is its own reward in more ways than one.

Perhaps, then, business schools should be judged by the happiness they generate for their graduates.

Unfortunately, M.B.A. programs are currently ranked—by U.S. News, BusinessWeek, and other unduly influential publications--using criteria that prominently include starting salaries for graduates and salary differentials pre- and post-business school. Rankings have such an important impact on M.B.A. programs in their intense competition for students, faculty members, and resources that it is unsurprising that the schools often try to game them—say, by admitting students not because they are the strongest applicants, but because they are interested in finance and consulting, which have historically been the highest-salaried jobs.

I propose that short-term measures of starting salaries or salary differentials be replaced in the rankings by those of long-term happiness. U.S. News and its ilk could survey the happiness of applicants and compare it with their happiness levels five, 10, and 20 years after graduation. Bruno Frey, an economist at the University of Zurich, notes that psychologists have learned how to measure happiness, and that "ways of measuring experienced utility are continually being improved." Those methods range from brain imaging to simple subjective surveys. The different measures correlate well with one another, indicating that the simple surveys, subjected to various reliability studies, should suffice.

Measuring happiness would encourage business schools to focus less on training students for the highest-paying jobs and more on preparing them for careers they will find satisfying in the long term. Surely high pay correlates with types of work that many students would enjoy. True, many will still aspire to be consultants, or financial titans who make the big bucks while working long hours under extreme pressure. But business schools should teach students that people are often poor judges of what will make them happy, and that if they think the answer is money, they are probably mistaken. Schools must convince students of the simple but lasting pleasures of relationships with family and friends and of serving others, contributing to the common good, and leading a moral life.

Students must be given the skills to follow their passions and not just to chase the almighty dollar. M.B.A. programs will always need to offer courses in how to invent, package, and market the latest forms of complex financial instruments. But if business schools truly want to serve their students well, they will offer more courses on how to market and finance nongovernmental organizations, how to manage profit and nonprofit organizations legally and ethically, even how to lead a meaningful life.

Today administrators of business schools are disappointed when a graduate chooses a $60,000-a-year CFO position at a local charity over a $120,000-a-year job on Wall Street—a decision that hurts the school in the rankings, although it may well increase the graduate's long-term happiness. Valuing happiness above income would align those two goals—securing a strong institutional reputation and creating a meaningful life—and more fully measure the value that M.B.A. programs are truly adding to their students' lives.

Robert A. Prentice is a professor of business law at the McCombs School of Business at the University of Texas at Austin and author, with Frank B. Cross, of Law and Corporate Finance (Edward Elgar, 2007).

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