Does Money Buy Happiness? - Econlib (2024)

Richard W Fulmer

Mar 20 2024 at 3:41pm

BS

Mar 20 2024 at 4:16pm

I had no fiscal stress when I was poor. Fiscal stress is mostly (not entirely) about personality.

Craig

Mar 20 2024 at 4:57pm

“I remain agnostic on the question of whether wealth increases happiness.”

Women are hypergamus. Glad I could clear up whatever vestiges of agnoticism might remain. 😉

One of the more powerful libertarian anecdotes is the anecdote of how voluntary exchange reveals genuine preferences to the exchange, a person trades a dollar for a pack of gum, the buyer prefers the gum to the dollar and the seller prefers the dollar to the pack of gum. Same vasic concept here, accumulating wealth to the extent people engage in that activity reveals a preference for wealth accumulation over philanthropy, leisure, other spendthrift ways. As Jimmy Fallon once quipped in a Capital One commercial, “99% of people prefer more money”

Jim Glass

Mar 21 2024 at 5:12am

Any idea that objective increases in income & wealth cause objective increase in happiness is contradicted by the fact that humans haven’t been growing objectively happier, happier, and ever happier over recent millennia. With the greatest happiness of all time being enjoyed en masse right now. Economists love to expand their realm, often with insightful results, but “happiness” they should leave to psychologists.

The psychologists say that humans are born with an objective happiness “set point”, varying by individual, and whatever happens to them they return to it. IIRC, this was first examined in the ’80s when children in hospital wards suffering from dreadful illnesses and injuries were noticed to be playing as happily as any others. Then set point behavior was widely documented in adults with, for example, cranky complainers who won the lottery being happy for a year then returning to moaning about all the new property taxes they had to pay, and cheerful optimists who suffered a financial or health calamity being down for a year then returning to being cheerfully up about wherever they were. As our DNA hasn’t changed, set points explain cave dwellers and ancient Romans being as happy as we are.

The next generation of research found happiness set points aren’t totally fixed but can indeed be shifted upward via specific practices and serious effort at self-improvement work or say Cognitive Behavior Therapy. This wasn’t noticed earlier because few people put in the effort. Most are happier to have their set points stay set and not be happier. Anyhow…

As to the economics, over the decades I’ve seen many studies finding Easterlin-type results of positive but diminishing “happiness returns” ending at some lower middle-class income level. Most often they’ve been interpreted not as rising income increasing happiness per se, but reducing stress and anxiety from fear of being unable to pay bills and the like, which makes people unhappy. Not the same thing. I’m good with that, and frankly don’t see any “paradox” in it at all.

As to economics and happiness, I’m with you: What does the word even mean in economics studies? About this new one…

Jean Twenge, a psychologist at San Diego State University, and A. Bell Cooper, a data scientist at Lynn University, examined data collected from 44,000 adult respondents to the General Social Survey (GSS) between 1972 and 2016 and found that more money does, in fact, correlate with more happiness.

The survey asks respondents to report their happiness on a three-point scale: “Taken all together, how would you say things are these days—would you say that you are very happy, pretty happy, or not too happy?” The researchers then parsed the data by income deciles…

Self-reported data (the worst) retrospectively collected … on how one subjectively feels … with “happiness” not defined to anyone in the study – potentially meaning something different to every single person … countless confounding variables … zero control group … causation presumed from correlation … gee, what could go wrong?

I know some grouchy people who are satisfied with what they have accomplished in life. Are they “happy”?

Amen to this. During my decades of lawyering in NYC I’ve known several millionaires and one billionaire who were very satisfied with their business-social-philanthropic achievements and who had really messed up families. Happy? I don’t know.

back when I actually had 98% less wealth than today, my mood was about the same is it is now.

This too. As a career self-employed my income has been way low, very high, far down, very top, repeat. When young and single in Manhattan with no responsibilities and a fraction of my future income, that was the life! When I had multiples of that income with a wife and three kids in private schools, it was always woe just around the corner. Now my income is lower again, the kids have grown and moved on (the ex-wife too) … 🙂

My experience through all my income epicycles was: enough income reduced stress and unhappiness, higher income never made me happy, no matter what my actual income level was. Other things did make me happy — and psychologists know a whole lot more about those many other things than economists do.

Economics is about welfare, not happiness. That’s for the psychologists. IMHO, FWIW.

Excellent comment!

Vivian Darkbloom

Mar 21 2024 at 8:55am

There are many things that go into making a person “happy” (I prefer the term “content”) As far as wealth is concerned, this armchair psychologist thinks that it is not the amount of wealth one has but the trajectory one is on. My advice to young people: If each year you are a little bit better off than the last, the chances are that this will contribute to your overall sense of well-being. Your chances of this are improved if you set aside part of your current income for saving and future consumption. Doing so will increase your level of optimism.

I also believe that, indeed, “inequality” plays a role. Humans are social animals and by nature competitive. Economists (and Warren Buffett) can tell people today that they are better of than John D. Rockefeller. But, hardly anyone is going to find that persuasive if one is much less well-off than those one is surrounded by.

Too much money can also create a lot of problems. I’ve advised many very wealthy people regarding choice of residence. Many if not most would choose not to live in a high tax environment for fear that it will cost them a larger part of their wealth. Rather than a liberating factor, it can easily become a limitation.

steve

Mar 21 2024 at 10:30am

Count me in the skeptical group on the happiness studies. It’s difficult to define but if you do try to define it then you are often just choosing the metrics that will support your outcome. If you rely upon self-reporting then you are, as Jim notes, relying upon very unreliable data. If economics doesnt want to be grouped with the softer sciences like psychology then I think they should be looking at more reliable measures. Does being wealthier affect divorce rates, suicide, bankruptcies, family size, number of friends, health, relationships with family, etc. I am sure there is a lot of other stuff but if you really want to study the effects wealth, measuring what it actually does would be more useful.

Steve

Good points. I’d say there’s also things which makes us less unhappy or much better off though we don’t think of it as ‘happiness’ — health is such a thing, its a steady state, we take it for granted until we don’t, but if you tell a woman, “Be happy because even though you just got a breast cancer diagnosis at least you needn’t suffer like Abigail Adams and have a much higher survivability percentage” — and while we’re thankful for better medicine in a certain sense we don’t call that happiness as we think of being ‘happy’

Jose Pablo

Mar 21 2024 at 1:59pm

But back when I actually had 98% less wealth than today, my mood was about the same is it is now.

Happiness seems to be positively correlated with age and age is negatively correlated with wealth. Age is negatively correlated with health and energy.

For a given level of age (or health or loved one’s health or ….) I have very little doubt that spending (and/or having the option to spend) increases happiness.

Or, as Vivian pointed out, maybe is really about spending more than last year (and/or having the option to spend more than last year).

Jose Pablo

Mar 21 2024 at 2:03pm

I remain agnostic on the question of whether wealth increases happiness. I am more sympathetic to the claim that freedom increases happiness

These seem to be two contradictory statements. At least at an individual level, wealth provides a significant amount of freedom (much more so than, for instance, the passing of your favorite constitutional amendment. Whatever it can be).

I don’t feel freer than when I had 98% less wealth.

JP

Mar 21 2024 at 2:38pm

Devin Lavelle

Apr 8 2024 at 1:55pm

I was very happy when I was young and poor. I had everything I needed, zero responsibility to account for, and little idea of what I was missing.

I was pretty unhappy when I was somewhat better off but with a less stable income and starting to have more financial responsibilities to worry about.

I was very happy when I had very young kids and no time/energy to spend the money I didn’t have anyway.

I started to get more stressed about money as I had more of it and also more time/options to spend it (combined with the very real responsibilities of kids and an increased mortgage).

I became more comfortable with all of that (and, generally, very happy) over time as I became to trust that I could afford it (and also realized what I couldn’t afford and stopped worrying/hoping for about that).

We’ll see what comes next …

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