Money and Happiness
Neat article in Newsweek about whether or not money buys happiness. While I don’t totally disagree with its conclusions, I also don’t totally agree with them, and I definitely don’t agree with their methodology.
They measured people’s happiness by asking them, on a scale of 1-10, how happy they are. That’s probably the worst method possible. People have no more ability to judge their own happiness than they do their own looks, or their ability to drive. Hell, if you want to do a fun experiment I invented long ago, go around and ask people to merely define happiness. Pretty much everyone starts stammering.
I definitely believe that money must have declining marginal utility. Having been through it, I can say that going from a negative income to a positive one is a pretty big jump, and getting to the point where money ceases to be a concern is a smaller but still noticeable increase as well. And I can only posit that both are far larger than the happiness gained by an increase from a few million in the bank to a few billion.
But I’d still wager that, by any objective measure, your average billionaire is a little happier than your average millionaire. If not, they would simply give away money until they were just a millionaire (who just gave a ridiculously large sum to the needy, which certainly has to make one feel better than a millionaire who didn’t) and you never see any of them do that.
The fact that guys like Bill Gates often give massive amounts to charity (him more than most of course) would seem to indicate that the indirect joy of making life better for others greatly outweighs the joy of having a few extra billion dollars. But the fact that none of them ever do so to the point of poverty, or even to the point of mere upper middle classness, would seem to indicate that there is some nontrivial amount of happiness in that extra money.
A much better methodology would be to find some objective measures of happiness and then compare. For instance, do a survey to see if rich people are less likely to take anti-depressants than the middle class. That particular one is probably bad measure, since they’re more able to afford that sort of thing, but there has to be some such quantifiable, objective metric or group of metrics that is much more accurate than asking people how happy they are.
November 2, 2007 at 2:57 am
Of course money has declining marginal utility. You know why? Because EVERY economic good has declining marginal utility. It's a basic axiom of economics.
Money is just a tool. It can't make you happy in and of itself, but all else equal, somebody with more money has a better shot of being happy than someone with less of it. Same goes for sandwiches, pussy and free time to spend eating sandwiches and pussy.
March 19, 2008 at 12:55 pm
“But the fact that none of them ever do so to the point of poverty, or even to the point of mere upper middle classness, would seem to indicate that there is some nontrivial amount of happiness in that extra money.”
A big assumption you make here is that people generally know what will make them happier. An even bigger assumption is that people who know what will make them happier will do that even if it means big sacrifices. I'm not saying that giving up all their money would lead to happiness. I only point out that you assume they don't do it because of happiness they'd be giving up.
Happiness may be an ambiguous term in general, but it's important that you define it correctly for yourself. Chasing after the wrong definition of happiness has dreadful consequences. I believe happiness generally comes from serving others. Money increases your potential for that, but there are no guarantees that people will use money to make themselves happy. Financial freedom can open up doors to great places, but it can also open doors to lonely wastelands.
March 19, 2008 at 1:00 pm
Perhaps true. But then wouldnâ??t the study in which they ask people “how happy are you?” be using a bad methodology?
March 19, 2008 at 5:06 pm
Definitely. Unless it was a study about how happy people think they are or are willing to admit, which is not very interesting.
I think you're spot on when you say: “People have no more ability to judge their own happiness than they do their own looks, or their ability to drive.” Which is to say it's not impossible to know where you stand, but that kind of meta-level perception is rare enough to be useless in this type of a survey.