Many would argue that money cannot buy happiness, but this week, we take a look at how money can actually buy happiness with some caveats. Certainly, happiness is not easy to define. How people derive happiness is also up for debate. Therefore, a common definition used by psychologists is subjective well-being, which is “a person’s cognitive or affective evaluation of his or her life.” Someone with higher subjective well-being has high levels of satisfaction in her life, and experience greater positive moods and feelings, or less unpleasant ones. So, how does money play a role in someone’s happiness, or subjective well-being?
Watch this short video on the economics of happiness:
In the video above, there are several salient points made. It is found that there is a positive correlation between income and happiness, but only up to a certain point. After that point, any increase in income does not necessarily make one happier. Other factors include how rich the people living around you are. People tend to make comparisons with those in proximity, and they are happier if they perceive themselves to be better off than others around them. In other words, happiness is derived not from the absolute amount of income, but from the status that money helps one to achieve.
How does money increase wellbeing?
As highlighted earlier, having money increases emotional well-being to a certain extent, supported by a Princeton study, which shows that beyond an annual income of $75,000, money does not have an effect on one’s happiness. On the other hand, low income families experience more emotional distress from misfortunes such as divorce, ill health, and loneliness. They conclude that having a high income buys life satisfaction (though not necessarily happiness) and a low income has negative effects on life’s satisfaction as well as emotional well-being.
The conclusion from the Princeton study supports the idea that just having wealth is not enough to be happy, and there are other considerations to factor in as well. But people do need to have basic levels of income to support their basic needs such as food, healthcare, and shelter. At the bottom of the pyramid of needs, money can indeed buy life satisfaction and happiness. And most of the time, it is only when a person has his basic needs covered that he can enjoy what money cannot buy.
Another study found that people who buy themselves time each month have reported higher life satisfaction. Being able to pay someone else to do something you dislike, or have to spend too much time doing, gives people the time freedom to focus on what they like to do. Using money to buy experiences has also been a blanket advice, but social class background comes into play. It is found that experiential buying works for higher income group individuals more so than the lower income. For lower income groups, being able to afford material goods is still a prerequisite to experience happiness.
Recently, there has been a ‘minimalism movement’, where advocates of a minimalist lifestyle promote the idea of ‘Less is More’. This movement arose from the realisation that we are buying too much stuff and hoarding too many things. The minimalist idea is an antithesis of consumerism. However, to reduce the need to buy things partially depends on the ability to spend on good quality possessions. The ability to have a choice on what to buy also requires certain level of privilege, as some have come to realise. In this case, you actually need money to buy the happiness promised by the minimalist movement. There are people who cannot afford to have a lot of things, and those preaching about their own journey towards minimalism as a key to happiness would need to be more sensitive to this too.
Money cannot necessarily promise happiness
It is not to say that the poor cannot be happy either. Some people may find contentment and satisfaction in living within their means and building good social relationships that are fulfilling. At the end of the day, having money does contribute to happiness, but while it is a necessary factor, by itself, it is not a sufficient one to bring about the holistic well-being that humans require.
Questions for further personal evaluation:
- Do you agree that money can buy happiness? Why, or why not?
- In your opinion, should governments reconsider what they measure as progress of their country if income is not necessarily a good predictor of wellbeing?
- ‘cognitive’: relating to the mental processes of understanding through thought, experience, and senses
- ‘affective’: relating to moods, feelings, and attitudes
- ‘touting’: attempt to persuade people of the merits of
Here are more related articles for further reading:
- The Sydney Morning Herald: A call to optimise consumption for maximising happiness.
“What is the optimal level of income, for example, and of gross domestic product as a country? What about energy use per person? We scarcely even ask these questions.
Take energy, for example. Around a decade ago, the UN noted that beyond a certain point, increasing energy use does not lead to increases in the Human Development Index (HDI).
Indeed, Canadian scientist Vaclav Smil had shown that the highest HDI rates were found to occur with a minimum annual energy use of 110 gigajoules (GJ) per person. This was roughly Italy’s rate at the time, the lowest among industrialised nations and around a third of the US figure. He noted no additional gains past that point, with diminishing returns past the threshold of only 40-70GJ per person.”
- National Public Radio: The growing cynicism of the Gross National Happiness Index in Bhutan.
“Needrup Zangpo, executive director of the Journalists’ Association of Bhutan, says the outside world glamorizes Bhutan but overlooks a list of problems besetting the country. For starters, youth unemployment stood at 13.2 percent in 2016, up from 10.7 percent the previous year, according to government data reported by leading national newspaper Kuensel.
Bhutan’s GDP was $2.2 billion in 2016, according to the World Bank, and the kingdom is on the U.N. list of “least developed countries.”
“We have an increasing income gap, we have increasing youth unemployment, environmental degradation,” Zangpo says.
Bhutan is facing climate change, he adds, with melting glaciers, potentially affecting the hydropower plants that provide the nation’s energy and a big chunk of its revenue. “We have a lot of things to worry about,” Zangpo says.
Radio host Zam says the idea of GNH may have put Bhutan on the map, but the concept has been hijacked by the West — and quantified to a degree that makes it unrecognizable to ordinary Bhutanese.”