Money Doesn't Buy Happiness

Money Doesn’t Buy Happiness

Although people with above-average incomes express somewhat higher than average general satisfaction with their lives, they do not seem to be significantly happier in their moment-to-moment experience. An article by Nobel laureate Daniel Kahneman and four colleagues in the 30 June 2006 edition of Science magazine reports that a boost in income results in only a short-lived increase in happiness and that an overall increase in the nation’s average income does nothing to increase happiness once the per capita gross domestic product exceeds $12,000 per year.

The authors discuss a number of possible explanations for money’s inadequacy. It could be that we get more pleasure from having more money than our neighbors than we get from the money itself. If everyone gets richer, no one is able to enjoy it. Another possibility is that goods aren’t that good. Although we get a surge of pleasure from buying a Lexus or a 50-inch plasma TV, the joy fades quickly. A third possibility is that wealthier people don’t know how to enjoy themselves. They spend more time working, more time in active leisure at the gym or tennis court, and less time in passive leisure in front of their expensive TVs. This formula results in more general life satisfaction but also more stress and less moment-to-moment happiness.

Why do we try so hard to increase our incomes if the result is not significantly greater happiness? The problem is the “focusing illusion.” If one thinks about the effect of a single factor on happiness, the tendency is to exaggerate its importance. Apparently, our problem is that we think too much about money, which can ultimately undermine our quest for happiness.