Ups and Downs
Money does make a difference to happiness in poorer countries though. If you don’t have enough for some degree of reasonable comfort, you can expect to be pretty stressed and unhappy.But once people reach a certain threshold (once they don’t have to worry about a roof over their heads or having enough to eat), extra money makes very little difference. (Of course, even in wealthy countries, there are some people who don’t have these basics.)
At least, that’s true with regard to rises in wealth.
Keeping Up
But why do we find it easier to adapt to rises than to falls? Perhaps our expectations make a big difference here. When we can’t buy as much, or as high quality goods, as we used to be able to, we really notice the difference. And our contentment falls.When we can’t buy as much, or as high quality goods, as we used to be able to, we really notice the difference.(Chi King,CC BY 2.0)
When we can buy what we most want without great difficulty, though, it doesn’t make much difference whether we have $100 left over afterwards, or $150.Another reason happiness doesn’t rise very much as income rises is that our expectations are shaped by what others in our social circle do and have. If everyone in our social circle has an iPhone, for instance, we think it’s reasonable to expect that we can have one too.
The computer you had three years ago would probably now strike you as unacceptably slow and clunky; at the time, though, you were impressed by its power and speed. But you now expect web pages to load much faster because that’s what you’re used to.
Moving Goalposts
Though national income doesn’t affect happiness above a threshold, there is a paradoxical, albeit weak, relation between relative income within a country and happiness. But the effects diminish over time.Here’s what seems to happen: when we receive a boost in income, the group of people to whom we compare ourselves gradually shifts.
Suppose you receive a promotion at work that considerably increases your income. As a result, you might be able to buy an expensive car, and comparing your new car to the cars driven by your friends might be a source of satisfaction to you.
Money could lead to happiness if it’s spent on experiences.(Marjan Lazarevski,CC BY 2.0)
So changes to happiness caused by changes in relative income tend to dissipate (though much less for people who do not place themselves in situations in which comparative assessments become probable).The wealth of experience
There is one way to buy happiness: spend it on experiences and not stuff.Experiences are (or maybe just seem) unique; their value doesn’t seem to decline relative to other experiences. Okay, maybe all your friends went to Phuket too; still, the meal you had at the beachside restaurant and the long walk afterwards through the tropical night is yours alone.
Further, the value of your experience doesn’t decline over time: in fact, it may grow in its worth to you as you relive it. Buying stuff stops our happiness declining, but only experiences seem to hold out the chance of increasing it.
And, of course, at the same time prevent everyone (no matter where they are or who they are) from falling below a threshold in material welfare that ensures they will not suffer the stresses of worrying about their basic needs being met.
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