MONEY AND HAPPINESS

Many Boomers believe that if we could just make a few more dollars we’d be happier and all would be well with our families and ourselves. The evidence suggests otherwise especially in the Second Half. This is borne out by Robert E. Lane, The Decline of Happiness in Market Economies, who reviewed surveys and polls taken over a thirty-year period and found that although people were earning more money and were more productive they were less happy than prior generations who earned a lot less. Richard Easterlin, a University of Southern California professor, reached a similar conclusion noting that while per capita gross domestic product over the last fifty years went up it did not result in higher levels of subjective well being (SWB), or happiness. David Myers, in The American Paradox writes, “the evidence leads to a startling conclusion-- our becoming much better off has not been accompanied by one iota of psychological well-being. Economic growth has provided no boost to our collective morale.” (Since first writing this, the economy and the market have been in free fall. Nonetheless, the point still rings true for many of us)


It is no secret that we live in a materialistic culture built on acquiring money and material possessions. And it’s been going on for a long time. Thorstein Veblein in his classic, The Theory of the Leisure Class, explained how nobles acquired horses, serfs, knights and castles in an attempt to enjoy the feudal Good Life. He coined the term conspicuous consumption to describe their shopping binges! Then, as now, the basic motivation for acquiring wealth and goods was gaining status and power. Ecclesiastes said, “Who ever loves money never has money enough, who ever loves wealth is never satisfied with his income.” The reason money and possessions don’t make us any happier is due to what economist refer to as the declining marginal utility of assets or DMU. ``Utility'' refers to the value that individuals gain from making more money or buying more goods or acquiring more status and fame. According to economists we soon adapt to having more assets. As a result they decline in value to us. This fuels a demand for acquiring still more. For example, someone gets a large raise. At first they are happy. However, because of the declining marginal utility of money the euphoria wears off and the individual becomes dissatisfied and lobbies for another raise. Robert Easterlin uses the term the “hedonic treadmill” to describe the endless striving for more money, material possessions and status. Like all other treadmills once you get on it’s hard to get off. F. Scott Fitzgerald put it another way in the The Great Gatsby, “to the spoils belongs the victor.”

Despite the futility of chasing the Good Life, why do so many of us continue living on the hedonic treadmill? Tomes have been written about mass media and its impact on consumerism and materialism. David Riesman in his groundbreaking book The Lonely Crowd, written in the early 1950’s, said the advertising industry created a generation of “other directed” people whose values, lifestyle and behavior were determined by aping individuals who enjoyed high status, wealth and influence in the culture. According to Riesman, before the advent of mass media advertising and TV people were “inner directed” and developed their values and belief systems through personal reflection and intellectual discovery. Although Riesman was writing about an earlier day most of us continue to be other-directed associating success, well-being, youth, good looks, money and status with happiness. Unfortunately, chasing these things has the opposite effect. This hit home while I was a struggling graduate student driving through Beverley Hills. My reaction to the opulent homes, manicured lawns, tennis courts, and driveways filled with Mercedes and BMWs was envy then depression. I realized the trappings of the Good Life were out of reach. After returning to my hotel I absent-mindedly flipped through the Beverly Hills Yellow Pages and was startled to find page after page listing Psychiatrists and Psychologists. Beverly Hills was one of the wealthiest communities in the country. But there must have been a lot of unhappy, unfulfilled people living in those mansions! My attitude about what made for a good life changed on the spot. Obviously money is an issue for many people. However, researchers have found that after a certain level of wealth is attained, usually when there is enough to provide for basic human needs and wants, this varies from country to country and culture to culture, there is no corresponding increase in happiness when wealth and material well-being increases beyond a certain level So why do we keep chasing after the good life? More on this subject later.