Wealth And Happyness

Catalin Moscaliuc

1

Wealth makes people happy.

This is a statement that, for many centuries, people took for granted. And my thought is

that the majority of them still believe in it even now. One of the main reasons for that, at

least in the modern times, is the image of happiness that is promoted everywhere in the

mass media.

We are 6 billions of customers and that is why we �have to’ be persuaded to buy. And

what is the best motivator the advertisers use in order to make us purchase a certain

thing? �Buy our product and you will be happy’. Even though now this message is not

that explicit, it is not very difficult to infer it after watching the commercial/seeing the

newspaper ad. Suddenly, everyone starts smiling and enjoying themselves and every

frown and grimace disappears. They are happy. And all this thanks to the new brand of

orange juice – �with up to 20% pulp’.

When you put the words �buy’ and �happy’ in the same sentence and keep it in mind for

a while, it does not take too much time until you notice that in order to be happy you have

to have money. But still that is not enough - they’re quite useless if you just own them.

You’ve got to $pend them.

We can then conclude that, in a consumer society like the one we live in, people use this

correlation between wealth and happiness as their motivation to work more and to

acquire a big number of material goods, thinking this is the best (if not the only) way to

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increase their subjective well being.

Previous findings have shown that rich people are, on average, not happier than the rest

(nor the poor are less happy) and consequently, material wealth is not such a strong factor

to influence people’s subjective well being.

Lately people have become more and more interested in studying the determinants of

happiness and how they could maximize their effects.

One of the most renowned researchers in this new field is Baron Richard Layard, a

previously well-known economist that decided to concentrate his attention on the study of

happiness, being one of the pioneers of what it is called �Happiness Research’

In his book, �Happiness – Lessons from a new science’, he looks at people’s �subjective

well being’ from a very practical perspective. The book is divided into 2 parts: �Part one

– The problem’ and �Part 2 – What can be done?’ and tries not only to identify the issues

people have while pursuing their happiness but also to give answers to those concerns.

Throughout the book, some of the chapters deal with the matters of economics or money

and wealth and their effects on happiness. Out of them, the fourth one, �If you’re so rich,

why aren’t you happy?’ is the most important from the perspective of the present paper. It

mainly deals with the matter of income and how its perception and variations influence

people’s happiness. The chapter is well structured, offering quite a number of examples

of real-world studies and surveys with empirical evidence for what the author is saying.

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But we must not forget that this is a book for the masses and it aims at being easy to

understand by as many people as possible and that is why we cannot require of it to have

the rigor of a real scientific paper.

In the introduction, to illustrate the point he tries to make throughout the chapter, the

author asks the reader to choose between two imaginary worlds, one in which he could

earn more, on an absolute scale, but less compared to other people, and the other in which

exactly the opposite was true. The answer to this question is the key to making sense of

the whole first part of this chapter – people are happier when they earn more than

neighbors or friends. People compare themselves with their neighbors and their friends,

but also with what they are used to getting.

Moving one to the next part of the chapter, ’Social Comparison’ the author leads us even

deeper in the concept of relativity he began to illustrate in the introduction. Using very

inspired examples he shows how it is only our perception of things that determines

whether we are more or less happy.

It talks about reference groups and how a shift in this aspect of our life can change a lot

in our happiness, giving the example of East Germany after 1990, when instead of feeling

better because their wages went up, people started comparing themselves with the West

Germans and the opposite effect was recorded. Another interesting finding presented in

this part of the chapter is the fact that a rise in other people’s income has a negative

impact on the happiness of an individual who was not subject to the rise. Following this

path it can be said that the harder the one works and raises his income, the unhappier he

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makes other people, and that is why the author uses the term �pollution’ for comparison.

But this only applies for income and not for leisure time, because next we are presented

with a study saying that people choose the biggest absolute value (over the relative one)

in terms of vacation days.

Afterwards, the reader in shown why, due to several factors, the most important being the

psychological process of adaptation, he will most probably never reach happiness through

material possessions and that is why he is encouraged to seek for it in other aspects of his

life (such as sex, marriage or friends).

The next section deals with the work-life balance and illustrates using the comparison

between Europe and US that having a balanced life and enough leisure time to spend with

the family and friends is very possible to be the key to happiness.

The last part of the chapter looks at inequality and gives the reader a brief description of

how some extra income gives less benefit to the rich as compared to the poor. It is also a

comparison between a number of societies with different levels of inequality.

The end of the chapter brings the reader the 2 recipe of happiness: “enjoy things as they

are, without comparing them to anything better” and “find out which things really make

you happy”.

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Baron Layard is one of the first researchers in the field that introduced the hedonic

treadmill principle when talking about happiness. People �run’ after their goals thinking

that achieving them would bring them a lot of well being but it is actually the �running’

that has this effect. If we stay and think about real- world cases to illustrate that, it does

make a lot of sense. There are countless examples of people that already accumulated so

many riches that not only them, but even their grandchildren would not be able to spend

in their lifetimes, but they are still struggling to make as much profit as possible from

their work. Their goal is not to be rich – they just enjoy the way they do that. So one

conclusion could be that �it is not the destination that matters the most, it is rather the

road’.

Thinking about how wealth influences happiness in more analytical terms, we can say

that in our day to day life it is quite important. Even if a substantial increase in one’s

earnings causes a growth in his subjective well being on the short term, it is a proven fact

that people adapt to the environment very easy and after a time period (varying from a

few months to a couple of years) they return to the initial level – which some argue that is

genetically determined. Although we keep this in mind, we cannot forget about the fact

that when talking about extreme cases things are somehow different, because a little more

extra money is more important for the poor than it is for the rich. For those who can

barely afford to buy the food they need from their income, an extra $ 100 / month means

something else than for someone who earns $ 10000 and this difference is also reflected

in the amount of well being this $ 100 brings to them.

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In the end, we can conclude that, except for the extreme cases, more money is not that

important for our well being as it is largely believed and, as can be inferred from the

Layard book, we should concentrate on other things in life, that really matter (such as sex,

friends and family) because by manipulating them we can get closer to the happiness we

dream of.

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References:

Layard, R. (2005), “Happiness – Lessons From a New Science,” New York: The

Penguins Press