What is the relationship between money and happiness? In 1974 University
of Pennsylvania professor Richard Easterlin examined this relationship
in a famous paper” Does Economic Growth Improve the Human Lot? Some
Easterlin found that within one country, at any given point in
time, those who make more money are more likely to be happy. He also
found that richer countries are generally happier than poorer ones. This
relationship between money and happiness is no surprise. Most of us
assume that money and happiness go hand in hand.
“There is only one class in the community that thinks more about money than the rich, and that is the poor.”
— Oscar Wilde
“The Easterlin Paradox”
Easterlin also found that in any one country , across time,
when income increases among the population (economic growth) happiness
doesn’t necessarily increase. For example, happiness in the US did not
increase between 1940 and 1970, despite the fact that our wealth did.
This has been dubbed the Easterlin paradox. Why would this be true? The
relationship between money happiness is complex.
Money and Happiness: Craving. Getting more makes us want more.
“Anyone who lives within their means suffers from a lack of imagination.”
— Oscar Wilde
Easterlin postulates when we have more we just want more.
Certainly this is consistent with what I personally know to be true.
What about you? I can remember when I was in college I just wanted to be
able to eat, have pizza money, and pay for my books. Now I want nice
furniture, a new kitchen, and star bucks coffee for breakfast. I didn’t
want those things before. I didn’t think I needed them. It’s a good
thing, too, because I couldn’t have afforded them.
“You’re not your job. You’re not how much money you have in
the bank. You’re not the car you drive. You’re not the contents of
your wallet. “ Chuck Palahniuk ( Fight Club)
When people make more, they want more. Then they spend more.
The gain they would have had financially from their increase in income
is is often canceled out by their desire for more.
Easterlin also postulates that within a given country, as wealth
increases, we will often trade off our happiness in other areas to
keep up with that lifestyle. We sacrifice other things such as health,
family time and job satisfaction while trying to keep up our income.The
mistake we make here is that those other things are also important to
In my practice I have seen this is true. If clients have money,
they are still unhappy. These clients are unhappy because they are
overworked, they don’t have time for their families, they don’t have
time for their spouses, and they don’t have time for their health. They
may also be unhappy because of other things. They are just less unhappy
about issues that have to do with money.
The relationship between money and happiness is not as clear as
we think. This is one of the mistakes most of us make on our path to
happiness. Just because people have money doesn’t mean they are happy.
Look at all the unhappy wealthy famous people!
Money Does Make you Happier, to a Certain Extent
The correlation between money and happiness is most direct when
you don’t have basic necessities or are unable to pay your bills. If you
can’t pay your mortgage (or don’t have a home) , or are unable to put
food on the table, or afford transportation or health care, more money
will make you happier. Once you have enough money to do what you need to
and live comfortably, more money won’t make you much happier.
“You buy furniture. You tell yourself, this is the last sofa I
will ever need in my life. Buy the sofa, then for a couple years
you’re satisfied that no matter what goes wrong, at least you’ve got
your sofa issue handled. Then the right set of dishes. Then the
perfect bed. The drapes. The rug. Then you’re trapped in your lovely
nest, and the things you used to own, now they own you. “ ~Chuck Palahniuk, Fight Club
Part of this is explained by hedonic adaptation. Hedonic
adaptation is the phenomena that as you experience changes you may at
first feel an increase in happiness, but it goes away. We get accustomed
This explains a lot about us. Children illustrate this concept
well. They may want a toy or video game desperately. They may act like
they can’t live without it, and feel like they can’t live without it.
What happens when they get that toy? They play with it for a little
while, may be thrilled and happy, but soon that goes away. They are on
to the next thing they want that will make them happy. Adults do the
same thing. Unfortunately we often act without an awareness of this
“Wake up, you idiots! Whatever made you think that money was so valuable?”
— Kurt Vonnegut
Money helps us to be happy to a certain point. However, when it
comes to being happy, there are other things that are important and must
be equally weighted with money. Often, we neglect those other things
while pursuing money.
As we often do, we pursue what we think will make us happy,and in doing so make ourselves more unhappy.
Money and Happiness are related, but there are many other things
that contribute to happiness. In the pages linked to this page money and
happiness will be more thoroughly discussed.
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