Does money make you happy?
Research offers some surprising answers. A closer look at the measurement error of materialism.
You've heard it a thousand times: Money doesn't buy happiness. Yet in spite of this axiom, people throughout history have tried mightily to accumulate riches. Are we suffering from some sort of collective delusion, or is it possible that money truly does buy happiness?
The evidence offers some surprising lessons:
•Rich nations aren't necessarily happier than poor ones.
•People at all income levels say they need about 40 percent more than they make.
•Feeling successful – not being rich – is most closely related to happiness.
•Capitalism is a vital ingredient in America's gross national happiness.
Let's take the global view first. Compare Mexico and France. In Mexico, most people live above the level of subsistence, but the average purchasing power is only about a third what it is in France. And yet Mexicans, in aggregate, are happier than the French. In Mexico in 2002, 63 percent of adults said they were very happy or completely happy. In France, only 35 percent gave one of these responses.
The more we get, the more we need
Like nations, once individuals reach subsistence, they get little or no extra happiness as they get richer – even massively richer.
In a 1978 study, two psychologists interviewed 22 major lottery winners and found that the joy of sudden wealth wore off in a few months. They had a harder time than others enjoying life's prosaic pleasures: watching television, shopping, talking with friends, and so forth.
The reason for this phenomenon is that humans tend to adapt psychologically to their circumstances – including their monetary ones – quickly. Economists call this the "hedonic treadmill."
One study shows that people report needing 40 percent more to reach a level they consider sufficient. If you earn $50,000 per year, you'll "need" $70,000. But if you get a raise and make $70,000, you'll soon "need" about $98,000. The more you have, the more you find you need.
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