Money and Happiness

“Money won’t make you happy.” A boring cliché, hammered into our heads by our moms since that gleeful afternoon when we showed her our first day’s profits from the lemonade stand. We still try our best to believe it, but secretly we don’t. In our hearts we’d like–just once–to be tested with wealth.

“Try me, I’ll bet I can be happy,” you challenge anyone who’ll listen as you purchase yet another Mega Millions ticket. But with the memory of mom’s wagging finger, your voice drops an octave, “Oh, just let me fantasize…it’s harmless fun.”

But, now, some interesting studies that crunched data relating to a range of incomes all over the world prove your mother was right. Whether you live in a tiny village in Zaire and your souvenir shop has just become a bus stop for tour buses and you anticipate tripling your goat herd, you’ve been made partner in your law firm, or, lottery-wise, your ship has come in, ultimately you’ll fall victim to something named the Easterlin Paradox.

Richard A. Easterlin is a professor of economics at University of Southern California who has spent the last few years collecting data on money and happiness. Originally he analyzed the impact of financial gain on individuals and their families, but later he moved on to track the happiness of entire nations that had benefitted from increased wealth. The personal incomes of Chile and South Korea, for example, have doubled during the past generation.

The paradox is this: Initially, when you, your family, or your country has more money you’ll feel immediate pleasure. “Oh boy!” you’ll crow delightedly, “Now I can buy more stuff!” But within a relatively short period you fall victim to “hedonic adaptation.” This means when the new Lexus you’d coveted for years and is now yours gets mud-spattered and stuck in traffic just like the rusting Toyota in front of you, you realize an even newer Lexus isn’t going to make you happier.

And all this really hits home when a grim-faced you zooms past the Toyota only to glimpse inside an obviously affectionate couple talking animatedly, one of whom pauses to give you a pleasant wave of her hand. Unlike you, they actually look happy.

In other words, we rapidly adapt to material improvements in our lives, but in the end feel no happier. Easterlin recently showed that the same paradox applies to whole nations during periods of sustained growth. Initially people bought stuff and seemed happier, but a decade later, nothing.

Another aspect of money and happiness concerns where the wealth comes from. Did you earn it yourself? Lottery winners, trust fund kids, and heirs of big money occupy a group whose chance for happiness and satisfaction is marginal. The second and third generations born to successful entrepreneurial corporation founders have a very high incidence of depression and substance abuse.

To feel any pleasure from money, it turns out, we need to work for it.

We weren’t hard-wired to have everything fall into our laps. Studying this hard wiring, researchers at Emory University analyzed the section of our brains called the striatum, which is involved with reward processing and pleasure. They used two groups of volunteers. The first had to play a complex computer game. If they were successful, they received a financial reward. The second group was simply handed an envelope containing the same amount of money.

Both groups showed immediate striatal stimulation on receiving the money, but it was a deeper and longer lasting stimulation in those who worked for it.

So really there’s no sense mooning enviously over the most recent lottery winner or the guy who speeds by you in a new Porsche. If you look back over your own life, your most joyful months or years were likely not money-related at all. Maybe you lived in an area of the country you emotionally connected with, you liked your job and co-workers, and you had some nice friendships.

If you recall your low salary or bank balance at the time, it’s probably with some ironic affection, centered around another cliché: I didn’t have much, but I was happy.

The point is, of course, that your mother was right all along.