With economists projecting a gloomy Christmas and an even gloomier 2009, new research offers clues into how a dispirited nation can hold on to some optimism. Is there a cure for the blues?

When did happiness become a subject for science?
Philosophers have been on the case for centuries. But in the past decade, a burgeoning field of study known as “positive psychology” has sought to redirect scientific attention from humanity’s psychological ills to its psychological successes. More than 200 colleges now offer courses in positive psychology, which seeks to maximize happiness both for individuals and for society at large. “The focus on pathology,” writes University of Pennsylvania psychologist Martin Seligman, “results in a model of the human being lacking the positive features which make life worth living.”

So what makes us happy?
The short answer, most experts agree, is our fellow humans. “We are basically social animals, and most of our enjoyment comes from other people,” says British social scientist Richard Layard. But it’s not that simple. Studies suggest that our socially derived happiness is also predicated on material well-being. In fact, poverty is a leading indicator of unhappiness both in people and in nations. Likewise, emotionally rewarding, well-compensated work is a key component of self-esteem. Little wonder, then, that massive economic dislocation—the kind that leads to widespread unemployment and poverty—is known as a “depression.”

How does money affect happiness?
There is no universal answer: A hedge fund manager and a Tibetan monk provide two very different models of satisfaction. But most experts agree that the correlation is direct—up to a point. Poor people become happier as they escape poverty, studies have shown, but once people are free from privation, the tie between money and happiness begins to fray. Wealth in America grew dramatically in the second half of the 20th century, but surveys found that Americans on average were no happier. One study found that the “happiness benefits” of money peaked at the modest income of $20,000. Middle-class and affluent people who seek more wealth are often stuck on what psychologists call a “hedonic treadmill”—a perpetual pursuit of material goods, which reduces the available time for personal relationships and yields minimal emotional rewards. The kick of owning a big house or a giant flat-screen television tends to be short-lived, as these possessions become the next, unexciting norm.

Then why do we pursue wealth?
In order to have a “positional” advantage over a rival, whether that be a brother-in-law, the loudmouth who lives across the street, or some imaginary “other.” Surveys have shown that most people would be happy making less money, but on one condition: that everyone else made even less. In fact, most people prefer that scenario to one in which their income rises but everyone else’s income rises more. In other words, it’s not how much we have that counts. It’s how much we have compared to how much the Joneses have. That could explain why people in more egalitarian societies generally report higher levels of satisfaction with their lives. Scandinavian countries with large social safety nets consistently score highest on the happiness scale.

Where does that leave us?
Even within a robust, sometimes shaky system of capitalism, psychologists believe that increased happiness is attainable. Distilled to its most basic level, positive psychology encourages people to strive for “mindfulness”—living in the moment, recognizing the beauty of nature, and appreciating the positive aspects of our lives. Research has also shown that happiness is enhanced by optimism; religious faith; acts of generosity and altruism such as community service; and work or hobbies that produce a frequent experience of “flow’’—a state of total engagement.

So happiness is in our control?
Not entirely. The word “happiness” shares an etymological root with “happenstance” (and “haphazard”), suggesting that fate determines our lot in life. In fact, research suggests that genes dictate perhaps half of an individual’s capacity for happiness, so biological factors beyond our control play a big role. Brain images reveal, for instance, that people with higher levels of activity in their left prefrontal cortex tend to be happier. In one study, brain images even enabled researchers to predict which babies were more likely to cry when their mothers left the room, based on the levels of prefrontal activity in the babies’ brains.

Can we be happier?
Within limits, it would seem. Researchers now postulate that each individual has a “set point” for happiness, which is essentially a default position. Deviations from that point tend to be short-lived, with the subject soon reverting to his or her norm no matter what life-altering change has occurred. Within a year of major life-altering experiences, writes Jonathan Haidt, author of The Happiness Hypothesis, “lottery winners and paraplegics have both, on average, returned most of the way to their baseline levels of happiness.” What does this mean for people encountering tough economic times? Chances are, experts say, that other than those who are truly devastated, most people will retain their basic outlook. The happy among us will find cause to stay upbeat. As for the unhappy souls—what’s one more downer?

Happiness as national policy
While technocrats the world over try to boost their nations’ Gross Domestic Product (GDP),the government of Bhutan is publicly dedicated to increasing GDH—Gross Domestic Happiness. The policy has four pillars: equitable and sustainable economic growth; environmental conservation; cultural preservation; and good government. But Bhutan is not the only nation focused on happiness as a matter of national policy. British Prime Minister Gordon Brown, encouraged by fellow Labor Party member and renowned happiness scholar Richard Layard, has shown interest in using happiness studies to advance “well being” in the U.K. Layard argues for teaching “happiness skills” in school and for curtailing advertising that targets children, in an attempt to stifle envy and greed. The nub of his approach, though, involves an aggressive program of income redistribution—since, he says, “an extra pound or dollar gives more happiness to poor people than to the rich.” Of course that leaves unaddressed the unhappiness caused when taxes are raised to make that possible.