Money can't buy happiness

This is a common phrase that many people pretend to believe in, at least they believe in it enough to quote it, but not enough to stop trying to buy happiness. For those of you who don't feel like reading the rest of this, then I will give you the answer right here and now. Happiness is other people. Feel free to read or not read the rest of this, you already know the answer.

One common emotion that affects nearly everyone is desire. We desire things, we covet them, we want bigger, better, faster, stronger, and more. We follow those desires in some sort of attempt to make things better. It will be better if I get a newer car. That higher paying job will finally make you happy. Those new curtains will give you the contentment you have been searching for your entire life.

The only problem is that it never quite works out the way we hoped it would. We buy the larger television (the one that will make us happy), and we get used to it in a matter of days. That $1000 television isn't providing anymore happiness than the $100 one it replaced. Those new curtains are forgotten in days, providing no happiness at all, except for the brief thrill of purchasing them and hanging them up. While that new SUV is an old SUV before it can guzzle its first tank of fuel.

There are many reasons that people continue these behavioral paths. But the main two are advertising, the myth of the "standard of living" and the temporary thrill of spending money.

Advertising

Advertising works wonders, it works even better than most people ever realize. And when I say advertising, I mean all advertising, which includes things such as movie and television programs, which are not technically advertisements, but still sell their "lifestyle" to the viewers. Without advertising, we would have no Pepsi, Coke, Nike, Britney Spears, or Tommy Hilfiger.

Advertising creates the brand name, and the idea of buying something for image. There is no real satisfaction down that road. That $60 pair of atheletic shoes is functionally identical to the $15 pair, and both pairs were probably made in the same East Asian sweatshop anyway.

If you didn't need something before you saw the advertisement, then chances are good that you don't need it after you see the advertisement. The tacos might be two for a dollar at Taco Bell on monday night, but what good is that if you don't really want any tacos in the first place?

The Standard of Living

In the early 20th century financial and economic planners noticed that they had a real problem on their hands. Workers had become too productive. There simply wasn't enough work for everyone to keep busy. They only saw two possible solutions, they could either cut down the work week, or create a big scam to keep everybody busy doing useless work. Cutting down the workweek would have cut into the profits of the big wigs, so instead the standard of living was created.

The worker of the early 20th century was productive enough to easily produce food, shelter, and clothing for himself, his family, and the rich executives above him. Advances in manufacturing just kept raising the amount of work that one worker could do. The only problem was that there was nothing for him to do, everyone's needs were being met. So they had to manufacture needs in order to keep the workers busy.

This is where the standard of living comes into play. You see for most of recorded history, man has been pretty easy to satisfy. All we really want is food, warmth, basic recreation, and other people to share it with. For a long time people were perfectly happy with huts, caves, and basic simple homes that anyone could build. Then came the standard of living. The basic idea of the standard of living is to flaunt what the rich have to the poor, in hopes that they will aspire to the "standards" of the rich.

Soon people had to have their own cars, radios, and treadmills. But it is never good enough. The wealthy always have fancier cars, radios, boats, and clothing. The working class just continues chasing after that dream though, that standard of living, throwing away their life for it.

This chase for a better "standard of living" is nearly endless. People will do anything with their money, except free up their own time. They will buy boats, dance classes, fancy cable television packages, satellite radios, and cellular phones. But they would never consider using that money to work less, not when the people on tv still have things that they don't.

• The modern worker is efficient enough to support a 19th century lifestyle with only a few hours a week of labor. The rest is almost completely wasted.

The thrill of the purchase

This is one of the worst things people can do. This is where people really do try to purchase happiness. People tend to try and buy their way out of depression and misery. If they are feeling down, then they go buy a new outfit, or a new DVD, or a new car. That purchase doesn't solve the problem, it is merely a temporary fix for a more permanent problem.

The thrill of the purchase is what causes people to think that their wasteful spending was a good idea. By the time the thrill wears off, they have completely forgotten that they spent the money, but somehow missed out on the happiness that they were really trying to purchase.

Some people are more prone to this effect than others. But almost everybody has some category, some niche, someplace in their life where they are trying to buy happiness. For some people it is a closet full of shoes, with other people it is shelves of unread books, and with other people it is gambling. It never works. You are never going to find that one pair of shoes that will make your life whole. That new video game isn't going to satisfy you anymore than the other 197 of them sitting in that deluxe CDROM storage carousel.

• Most people rarely use the majority of their possessions. They are liabilities rather than assets. They are items bought to satisfy a temporary craving, and then carried around like so much excess baggage.

The satisfaction curve

The amount of satisfaction a person will receive from a product or service is rarely in direct 1 to 1 correlation with the cost. In fact it isn't even close to a 1 to 1 correlation. It is more like a curved distribution, with the majority of the "satisfaction units" being purchased with the first bit of money used (also known as "the law of diminishing returns").

Will a brand new $25,000 motorcycle really provide 25 times as much pleasure and utility as a $1000 used motorcycle? Will that $30 restaurant dinner really fill your belly 15 times as much as a $2 dinner made at home (and will it even matter the next day?). Does that brand new $30 hardcover book truly provide 300 times more reading enjoyment than a 10 cent used paperback book. Of course not. In all of these cases the more expensive option only provides minimal benefit over the cheaper option, yet costs many times as much money.

Look at your own life, and everything you own. Is your most valued possession the one you spent the most money on? Probably not, my most valued possession is a picture of Katie, which is worthless, yet I would give up everything else I own before I gave up that photo.

It basically all boils down to the fact that bigger, better, faster, and more expensive doesn't mean that it is truly better. Money spent is hours of your life wasted. More specifically it is hours wasted that you can never get back. If you really want to buy happiness than choose a cheaper lifestyle. Choose time off work rather than money spent on keeping up with the neighbors. Choose time spent with friends and family before you time runs out. Choose life.

Keep reading cowboy, I fully endorse the writeup below this one.

Oh yes it can. Consider: if I had all the money I needed, these are the things I would do this year:

• Go back home to see my family and friends.
• Soak up the sun in Polynesia.
• Eat well.
• Have friends over for lavish dinners at my house.
• Put away money for my parents' and in-laws' retirement.
• Give more to charity.
• Buy books.
• Get a home of my own.

And this is just a preliminary list, off the top of my head. You might notice how it doesn't contain SUVs, unnecessary gadgets or branded lifestyle products - just the basic necessities of life, plus a few small extras for the soul.

When you're so poor that you don't know where your next rent payment or your next packet of cigarettes are coming from, money buys everything - health, comfort, confidence and, yes, happiness.

I have nothing against the anti-consumerist angle TBBK is coming from. I shop Fair Trade, I avoid Nike and Gap, McDonalds and Wal-Mart and all that. But there is such a thing as going too far in the other direction, you know. Money is not unimportant - it is the indicator of one's labour and talent, and, although this is often misused to create bogus social distinctions, it is not a trivial phenomenon. Now that we don't grow or kill our food anymore, money is our sustenance. It's not inherently dirty or wrong, and you do need at least some of it to be happy.

I completely agree with what the author of the first writeup says, but the real title of that article is "Using Money Only to Buy Stuff Can't Bring Happiness".

It's all about how you use the money. If you use it to move to a place where you feel at home, it will bring you happiness. If you use it to quit the well-paying job you hate and instead work for a non-profit doing something you love instead, it will bring you happiness. If you use it for experiences instead of things - say, to travel the world, it will bring you happiness.

In our modern culture, money came to mean "material possessions". That's not what it was meant to be and not what it really is even now. Money represents how much power you have in society, and power is freedom - freedom to be able to do what you really want and not to have to put up with anything you hate. How could that not make you happy?

According to psychology, the age-old aphorism "money can't buy happiness" is actually true... after a certain point. Studies have shown more than once that GDP per capita (commonly held to represent a nation's standard of living) doesn't have much correlation to the population's overall happiness. It is definitely true that the extremely poor are unhappy, since they can't even satisfy their base needs, but once a person gets enough money to survive the line gets blurrier.

Below the $75 000 per year income line, happiness increases with money, as you might expect. But after $75k, it plateaus -- if you're only counting money, at least. Once you get beyond a certain point of having enough money to get by, your happiness has more to do with your own personal feelings of autonomy and mastery in your life. This has to do with your mind's interpretation of intrinsic vs. extrinsic rewards -- the former being your inner motivation to do things because you genuinely want to, the latter being your motivation to do things because you serve to gain something (e.g., money, social status, XP).

A study published in the Journal of Personality and Social Psychology involved researchers separating artistic children into three groups and giving them different instructions: the first group was told that they would be rewarded if they drew a picture during play time; the second group wasn't told, but was still rewarded if they drew a picture; and the third group wasn't rewarded no matter what. The findings reported in the study showed that the last two groups drew just as many pictures after they began the study as they did before -- but the first group, the one that had been promised a reward, drew less pictures.

When you have a carrot dangling in front of your face, the carrot becomes your motivation. It doesn't matter if you would have enjoyed running without the carrot. This is due to something called the overjustification effect: your mind only attributes reasoning to your actions after you've already done them, so when there's an extrinsic motivation, the mind will assume that it was the source of your satisfaction, robbing you of your personal accomplishment. This is why people being paid by the hour do the least work possible to get their money, even if they enjoy the work. (This also might be why politicians seem to get so much worse once they're in office, getting paid.)

If you're making less than $75k per year, money might be a potent extrinsic motivation. But once you have enough money that you don't really need it anymore, your personal satisfaction in gaining that money starts to disappear. Continuing to gain money after a certain point will not only not make you happier, it can actually poison your enjoyment of things you previously enjoyed due to the overjustification effect.

What I'm saying is, don't turn what you love into a meaningless job. If you make sure you do the things you love because you love them, not because you want money, you'll be more motivated to do those things in the future. Always strive to be better: autonomy, your ability to control your own destiny, is a major part of your happiness; the other major part is mastery, your desire to improve at what you love. If you're stagnating and sticking to a formula because you've been successful doing that in the past, you're bound to fail. Even if the quality of your work doesn't drop, you'll have failed yourself.

As annoying as human motivation can be, look on the bright side: without our love of mastery and autonomy, we wouldn't have open source software, we wouldn't have Wikipedia, and we wouldn't have Everything2. If we didn't feel that need to create something great just because we can, we would be a lot worse off as a species.

Sources

1. Deaton, Angus. "Income, Health, and Well-Being Around the World." Journal of Economic Perspectives, 2008, Vol. 22, No. 2. [link]
2. Lepper, Mark R. & Greene, David & Nisbett, Richard E. "Undermining children's intrinsic interest with extrinsic reward." Stanford University, University of Michigan. Journal of Personality and Social Psychology, 1973, Vol. 28, No. 1, 129-137. [link]
3. Benjamin, Daniel J. & Heffetz, Ori & Kimball, Miles S. & Rees-Jones, Alex. "Do People Seek to Maximize Happiness?" Cornell University, University of Michigan. [link]
4. Easterlin, Richard A. "Does economic growth improve the human lot?" From Paul A. David and Melvin W. Reder (eds.), Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz. 1974. New York: Academic Press, Inc.
5. McRaney, David. You Are Not So Smart: The Overjustification Effect.
6. RSA Animate. The surprising truth about what motivates us