Is Happiness Money? An Analysis of the Linkage Between Happiness and Wealth
Remember grandma’s old adage: “money can’t buy you happiness?” Well, many are now saying that it can. Is this a mere justification for this age of capitalistic infatuation or the start of a new normal? Let’s explore money’s place in the human psyche and if it truly buys more happiness than it used to.
Many of us form relationships with money as children — Monopoly, elementary school math problems, or the allowance that our parents (finally!) give us. Special shoutout to my high school economics teacher who taught his incredibly young children about the concept of money by resisting material urges at Disneyland, one of the toughest playgrounds in the world. He did a great job convincing my parents to do the same. I thank him for his service.
But as we grow older, our views diversify. Some of us become cryptocurrency connoisseurs while others take on multiple part-time jobs to cultivate funds for expenses. In young adulthood, we all have different experiences with money and how we attain it. But despite these various differences, there seems to be a singular connecting idea: money is important.
How important is it, though?
Renowned UC Berkeley psychology Professor Dacher Keltner asserts that “we are wired to maximize consumption and pleasure.” This brings us to contemplate relevant themes of Homo Economicus, a play on homo sapiens meaning “economic man.” The concept of Homo Economicus was proposed in the 19th century by John Stuart Mill; it quickly evolved to portray humans as agents who consistently pursue rational and self-interested means in society. The “economic man” avoids unnecessary work and acts in his own economic self-interest. We can look to economists like Adam Smith and David Ricardo as well as philosophers like Aristotle, who discussed man’s self-interested tendencies in Politics, for strong arguments on the presence of Homo Economicus in our lives. But there are criticisms of the theory considering that humans tend to make irrational decisions in certain circumstances; however, many do see the underlying basis of the theory…especially during holiday season when 79% of consumers in Klarna’s, a Swedish Fintech company, survey choose to buy last-minute gifts for their loved ones within two weeks of Christmas. So, are we selfish, competitive, status-driven, gratification machines like the studies pose?”
To understand this, let’s look back in time. Contemporary economic justifications of American materialism trace their intellectual roots to Chicago School economist Milton Friedman’s free-market theories. Friedman’s work pushes the notion that “greed is good”. Greed is supposed to drive us to enhance status and well-being, but has this perception of economics led us anywhere?
“Americans do many things to make more money without question” (just think, Leonardo Dicaprio in Wolf of Wall Street), Professor Keltner cites in a lecture for his empirical course on human happiness. “We leave communities for higher-paying jobs. We perform long-distance relationships, work long hours, survive with little leisure/vacation.” Why? Because money is the goal. Here, the Commuting Paradox, as synthesized by Alois Stutzer and Bruno S. Frey of Switzerland, comes into play. The average commute in Berkeley is 56 minutes a day while the average time for the entire United States is 48 minutes, One hour of commuting has been shown to lead to a .2 drop in happiness on a 10 point scale (2%). Americans commute for better-paying jobs, beautiful homes, nicer lawns, but we sacrifice happiness in the process. Is it worth it?
This rat race for money has definitely preceded my generation. David Myers’ American Paradox finds that, between 1957 and 1995, the wealth of American citizens doubled but happiness remained unchanged. So what’s the point?
Is pursuing money, at the root of things, just a goal we use to keep ourselves occupied?
Possibly. However, this concept is at the root of our capitalistic society. Such changes may not be in our control. But what can be done is managing our personal connection with money, especially pertaining to our happiness.
Studies by Angus Deaton and Daniel Kahneman disprove the myth that happiness is for the young. So, when are we happiest? At 70 (on average) according to Deaton and Kahneman’s empirical studies of stress and well-being in 450,000 Americans. They hypothesize that this is because, as age increases, gratitude rises and self-focus decreases. One tends to seek social ties over gains in status. Simply put, we focus on our loved ones rather than ourselves! They also predict this leads to more perspective in the face of stress when compared to the average middle-aged American citizen. AKA: relying on experience and trusting the flow of events leads to less stress and overthinking.
Deaton and Kahneman also anticipate from their research that a mere 10% of Happiness comes from material wealth/income. Their findings analyze wealth internationally but admit that these trends cannot be extrapolated for all countries given changes in livelihoods and baseline living standards. The wealth of a country correlates with self-reported happiness with an r = 0.67.” Wealth in the US correlates 0.12 with self-reported happiness. 37% of Forbes’ wealthiest are less happy than the average American. After an income of 75,000 US dollars per year, making more money doesn’t bring much more overall well-being.
So, what now?
It’s doubtful that we will all one day decide to trash the concept of paper bills determining our livelihoods, but these interesting findings push the debate forward. How do different generations view money today? How do money and socioeconomic status truly impact our well-being? Will happiness, instead of money, ever be the goal? And of course, is happiness, money?
I push you all to reevaluate your relationship with money. In other words, try baking cupcakes or meditating rather than online shopping next time you’re bored or busy (yes, this is an indirect allusion towards myself). Understand your position in time and work accordingly. As you traverse our productivity-ridden society, make sure to connect with your inner desires and pursue your passions. And when at Disneyland, beware. In fact, “greed is not always good” and “happiness is not money.”
For resources on money management for young people, check the links attached below!
Understanding your relationship with money: https://financialresidency.com/relationship-with-money/
- Learning about Financial Wellness: https://www.forbes.com/sites/forbesfinancecouncil/2019/11/22/what-is-your-relationship-with-money/?sh=28ed6bc02ddb
- 6 ways to build a healthier relationship with money and yourself: https://www.thedollarstretcher.com/personal-finance/ways-to-build-a-healthy-relationship-with-money/
- Tips for people like me: https://www.frugalitymagazine.com/how-to-keep-yourself-busy-without-spending-money-79983/