Author Topic: Money Buys Happiness  (Read 6341 times)

menorman

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Money Buys Happiness
« on: May 02, 2013, 12:40:11 AM »
Apparently, the increasing savings rate and decrease in consumer spending is scaring some people. They want you to keep calm and spend on because money (spending) makes you happy. But shh, don't tell MMM that his happiness couldn't possibly be real since it comes without spending exorbitant sums.

the fixer

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Re: Money Buys Happiness
« Reply #1 on: May 02, 2013, 07:30:51 AM »
Technically, the sourced study is saying increased income leads to increased probability of being happy. The author of the article has misinterpreted the results into the idea that increased spending makes you happy with such explanations as keeping up with the Joneses and donating to charity.

I'm not all that surprised that people are more likely to be happy if they earn more, since that makes it easier to save more. A lot of my present-day happiness is rooted in financial security from my Stash. That gives me the flexibility to do more of what I want and less of what earns me money, which is not always the same thing.

arebelspy

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Re: Money Buys Happiness
« Reply #2 on: May 02, 2013, 07:33:37 AM »
"There is a certain Buddhistic calm that comes from having money in the bank." - Tom Robbins
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MrsPete

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Re: Money Buys Happiness
« Reply #3 on: May 02, 2013, 08:12:57 AM »
Having grown up without money and without financial security, I can assure you that I found ZERO happiness in being poor.  As a teenager, I was not happy going without school lunch, walking around in clothes that were too small or worn out, and doing with things I needed -- like eye glasses. 

I'm not talking about overspending on luxuries, but NOT having money is pretty much a sure-fire method of assuring UNhappiness.  I've never bought into those country songs that dote on how mom and dad's love was all the kids needed, and they didn't realize they were poor.  I've never been so stupid as to fail to recognize hunger.

However, it's false to say that money can buy happiness.  Having enough to live upon comfortably is one step towards happiness, but it won't take you all the way to that goal. 

skyrefuge

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Re: Money Buys Happiness
« Reply #4 on: May 02, 2013, 09:37:34 AM »
I'm not all that surprised that people are more likely to be happy if they earn more, since that makes it easier to save more. A lot of my present-day happiness is rooted in financial security from my Stash. That gives me the flexibility to do more of what I want and less of what earns me money, which is not always the same thing.

Yep, I have a (rather hedonic) friend who took this study as a refutation of hedonic adaptation, and as a response I wrote a very similar analysis as you:

Yeah, this paper is really just a subset of earlier research (Kahneman/Deaton), and they reproduced the same result for the particular question they analyzed, which is not exactly "happiness".

Rather, they analyzed something more akin to "life satisfaction", using a visualization of a ladder. Here is the question they analyzed:

Please imagine a ladder with steps numbered from zero at the bottom to ten at the top. Suppose we say that the top of the ladder represents the best possible life for you, and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time, assuming that the higher the step the better you feel about your life, and the lower the step the worse you feel about it? Which step comes closest to the way you feel?

They also looked at a simpler version of a similar question:

All things considered, how satisfied are you with your life as a whole these days? Use a 0 to 10 scale, where 0 is dissatisfied and 10 is satisfied.

Both Stevenson/Wolfers and Kahneman/Deaton concluded that by this metric, life-satisfaction rises with income, with no income level where the life-satisfaction gains end. This makes sense, because the questions immediately put you in a comparative frame of mind, and since most people *think* more money will make them happier, having less income than their peers causes them to give a lower rating for their life-satisfaction. And heck, causation probably goes the other way too; people with an alcoholic husband who beats them, and thus have a low life-satisfaction, are probably less likely to have the ability to achieve higher incomes.

But Kahneman/Deaton also analyzed other types of questions, more akin to actual emotional "happiness". For emotions like "enjoyment", "smiling/laughing", "stress", "worry", they asked:

Did you experience the following feelings during a lot of the day yesterday? How about _____?

For these personal, actually-felt emotions, with no implied comparison to their peers, they concluded that improvement again rises with income, but improvements end somewhere around $75,000.

Furthermore, the concept of hedonic adaptation involves *spending* money on things, e.g., "does buying nicer stuff make you happier?" These studies don't actually use any spending data, they only use income data. In many cases, income is a reasonable (and often only-available) proxy for spending, but it's a particularly bad fit for the life-satisfaction question. As the fixer points out, it seems quite reasonable to assume that the savings, security, and flexibility afforded by a higher income can raise life-satisfaction levels, regardless of whether that increased income is used for current spending.

jdoolin

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Re: Money Buys Happiness
« Reply #5 on: May 02, 2013, 10:21:02 AM »
Having grown up without money and without financial security, I can assure you that I found ZERO happiness in being poor.  As a teenager, I was not happy going without school lunch, walking around in clothes that were too small or worn out, and doing with things I needed -- like eye glasses. 

I'm not talking about overspending on luxuries, but NOT having money is pretty much a sure-fire method of assuring UNhappiness.  I've never bought into those country songs that dote on how mom and dad's love was all the kids needed, and they didn't realize they were poor.  I've never been so stupid as to fail to recognize hunger.

However, it's false to say that money can buy happiness.  Having enough to live upon comfortably is one step towards happiness, but it won't take you all the way to that goal.

Yeah, that original study that was done pretty much confirmed this.  The results showed that more money DOES increase happiness when it takes a person from true poverty to having enough to cover their basic needs.

But once those needs are met, things get different, and more money doesn't always mean more happiness, nor does the happiness increase directly with with amount of money one makes/spends.

Spork

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Re: Money Buys Happiness
« Reply #6 on: May 02, 2013, 10:29:55 AM »
In general, I think money does buy happiness.  The "gotcha" is that amount of happiness you get decreases as the money increases.  (Maybe another way of saying this is it takes bigger and bigger piles to get the same amount of return.)

The "cost per wow" goes up.

the fixer

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Re: Money Buys Happiness
« Reply #7 on: May 02, 2013, 10:44:57 AM »
Both Stevenson/Wolfers and Kahneman/Deaton concluded that by this metric, life-satisfaction rises with income, with no income level where the life-satisfaction gains end. This makes sense, because the questions immediately put you in a comparative frame of mind, and since most people *think* more money will make them happier, having less income than their peers causes them to give a lower rating for their life-satisfaction.
That's a really interesting idea... what if people are basing their happiness level on their perceived wealth and income level compared to the rest of society? In other words, they're being guilt-tripped by hearing about people worse off than they are and envious of those earning more, so they gravitate toward an answer that reflects how many people are above and below them?

I wonder how you could test this...

Jamesqf

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Re: Money Buys Happiness
« Reply #8 on: May 02, 2013, 12:11:57 PM »
A lot of my present-day happiness is rooted in financial security from my Stash. That gives me the flexibility to do more of what I want and less of what earns me money, which is not always the same thing.

Yes.  Beyond acquiring basic necessities (and a few comforts/luxuries), I get far more happiness from having money than from spending it.

Though that's even a little simplistic, because I'm not really getting happiness from the money.  Rather, having that stash reduces all the nagging worries that come from not having enough, and let me repurpose worrying energy to becoming happy.

Dr.Vibrissae

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Re: Money Buys Happiness
« Reply #9 on: May 02, 2013, 03:36:16 PM »
Did anyone else find it odd that he spent the whole article claiming that the study finds that money CAN amke you happy, but then sums it up with:
Quote
So if happiness is what you want, look inward, rather than what your neighbors might have. Sounds obvious, but sometimes it takes a team of economists to prove it.

Which seems to be a non sequitor, if not a complete refutation of the entire article preceding it.

menorman

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Re: Money Buys Happiness
« Reply #10 on: May 03, 2013, 12:27:08 AM »
In general, I think money does buy happiness.  The "gotcha" is that amount of happiness you get decreases as the money increases.  (Maybe another way of saying this is it takes bigger and bigger piles to get the same amount of return.)

The "cost per wow" goes up.
That's the basic premise the article asserts: money does buy happiness, just the rich have to spend more money to get comparative levels of happiness. In which case, being rich must suck.

Freeyourchains

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Re: Money Buys Happiness
« Reply #11 on: May 29, 2013, 12:34:45 PM »
A stache is much more protected in the hands of Mustachians, so instead of donating money and working harder to then be taxed more for it, just donate your time. You will get a much bigger boast helping someone out with your bare hands, then you would paying your butler to help them out.

aclarridge

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Re: Money Buys Happiness
« Reply #12 on: May 29, 2013, 12:58:38 PM »
Both Stevenson/Wolfers and Kahneman/Deaton concluded that by this metric, life-satisfaction rises with income, with no income level where the life-satisfaction gains end. This makes sense, because the questions immediately put you in a comparative frame of mind, and since most people *think* more money will make them happier, having less income than their peers causes them to give a lower rating for their life-satisfaction.
That's a really interesting idea... what if people are basing their happiness level on their perceived wealth and income level compared to the rest of society? In other words, they're being guilt-tripped by hearing about people worse off than they are and envious of those earning more, so they gravitate toward an answer that reflects how many people are above and below them?

I wonder how you could test this...

I always have thought this is the case. Aside from extreme situations of starvation or whatever, as long as you think everybody has about the same level of luxury you do, then no matter how poor you are, you probably aren't unhappy due to lack of money. The actual amount of happiness you have is then determined by other factors such as your relationships with people.

Conversely, it may be true that if you have more luxuries than your peers, you'll be happier. I think some people here are probably striving for this whether they realize it or not, and they interpret free time and experiences as a greater luxury than material possessions.