“I’m tired of Love: I’m still more tired of Rhyme.
But Money gives me pleasure all the time.”
I came across a very interesting book the other day called Happiness and Economics: How the Economy and Institutions Affect Human Well-Being by Bruno S. Frey and Alois Stutzer. It’s a technical book, with lots of graphs and mathematical regressions, but the conclusions are pretty clear: “The general result seems to be that happiness and income are indeed positively related.”1 In other words, money can provide many benefits–more opportunities, higher status in society, and the ability to travel and enjoy better food, housing, health care, and entertainment. Several studies indicate that wealthier people live longer. In short, money fulfills highly desirable wants.
I remember the day that I discovered that I would be financially independent. It was a summer day in the late 1970s when I came home and presented my wife with over a dozen checks from a mail-order business I had started. Within a year, we had bought our first home, with 20 percent down, and by 1984, we had become successful enough that we could move our entire family (with four children) to the Bahamas to “retire.” The experience of becoming financially secure gave Jo Ann and me an incredible feeling of satisfaction. Of course, we didn’t really retire. We used our free time to read and write, go sailing, spend time with our children, and become involved in the local theater, a private school, and church work.2
Why Most Poor People Are Unhappy
The graph on the next page shows the relationship between income and happiness across nations. In general, people in poor countries are less satisfied than people in rich countries. One reason is that poor nations are often more subject to violence and uncertainty. As Frey and Stutzer state, “Countries with higher per capita incomes tend to have more stable democracies than poor countries have. . . . The higher the income, then the more secure human rights are, the better average health is, and the more equal the distribution of income is. Thus, human rights, health, and distributional equality may seemingly make happiness rise with income.”3
But the graph also indicates that money causes diminishing returns in happiness. Subjective well-being rises with income, but once beyond a certain threshold, income has little or no effect on happiness. Many wealthy people have experienced this law of diminishing returns and are not any more happy than middle-class people. In fact, some wealthy people are downright unhappy. Frey and Stutzer conclude, “Higher happiness with material things wears off.”4
Four Elements of Happiness
Years ago I read a sermon by a church leader on the “Four Sources of Happiness.” He spoke of work, recreation, love, and worship. I think he’s right.
First, you have to find rewarding and honest employment to be happy. Hard work and entrepreneurship offer the opportunity to create surplus wealth. Money in the bank gives you a real sense of security as well as freedom to do what you want to do. Moreover, studies show that unemployed people, believing they are not contributing to society or themselves, are generally unhappy.
Second, recreation is essential to your well-being. It helps to take a break from work from time to time. Relaxation and avocations are essential elements of a happy life. People who spend too much time at the office and can’t relax with their family or friends at home need to learn the joy of recreation with a hobby, sports, travel, or other avocation. Some of my most memorable times have been playing softball or basketball with friends, traveling with _family members on the weekend, or visiting a bookstore.
Third, love and friendship are also key elements of happiness. Everyone needs someone to confide in, to spend time with, to learn from, to reminisce with, to love and to be loved by. For most people, love and friendship take time and effort. You have to work at developing friendships, but the rewards are never-ending.
Finally, worship. Developing one’s spiritual side is essential to happiness. Some of my friends say they don’t need religion, but they are missing out on one of the joys of life–listening to a great sermon, singing hymns, meditating on the word of God, and praying for God’s help in solving business or family problems.
Let me conclude this essay with a delightful stanza by the Norwegian playwright Henrik Ibsen, who put the role of money in the proper perspective:
Money may be the husk of many things, but not the kernel.
It brings you food, but not appetite;
Medicine, but not health;
Acquaintances, but not friends;
Servants, but not faithfulness;
Days of pleasure, but not peace or happiness.
- Bruno S. Frey and Alois Stutzer, Happiness and Economics (Princeton, N.J.: Princeton University Press, 2002), p. 81.
- See my article “Easy Living-My Two Years in the Bahamas” at www.mskousen.com.
- Frey and Stutzer, p. 75.
- Ibid., p. 78. In fact, Frey and Stutzer publish a graph showing that “Per capita income in the United States has risen sharply in recent decades, but the proportion of persons considering themselves to be ‘very happy’ has fallen over the same period” (p. 77).
Mark Skousen is a Presidential Fellow at Chapman University, editor of Forecasts & Strategies, and author of over 25 books. He is the former president of FEE and now produces FreedomFest, billed as the world's largest gathering of free minds. Based on his work “The Structure of Production” (NYU Press, 1990), the federal government now publishes a broader, more accurate measure of the economy, Gross Output (GO), every quarter along with GDP.
The thought of money being the source of happiness is quite interesting. It is a fact that we need money to survive in this expensive economy, and without it we might tend to struggle. Money gives us the opportunity to buy clothes, food, shelter, and many other necessities of life. But does money truly bring happiness? Some may argue that money can make you happy and others will argue that it doesn’t. Why do some believe that money is the source of happiness?
I asked this question to a fellow colleague and she responded with a personal experience that she faces at home. She said that life at home is usually happy and that arguing is rare, except for the times when her parents argue about money. She told me that her mother and father are always stressed about paying the bills and other expenses that come up each month. She ended with saying, “yes money can make you happy, because it can eliminate many stresses and problems that not having enough money can bring. Others feel that money is a source of happiness because it allows them to enjoy the many opportunities and experiences that life has to offer. With money they are able to buy luxurious dream homes, the newest appliances and products, dine at the finest restaurants and travel around the world. Indeed, all these things can be a source of happiness, but is it long term happiness? Some may argue that they find happiness by sharing their money with others. They gain personal satisfaction by sharing their fortune with those who are less fortunate.
Many wealthy people have donated hundreds of thousands of dollars to charities or have given some of their wealth as gifts to love ones. A study conducted by the Journal of Consumer Psychology concluded that people felt happier when they reflected on a time when they had spent money on others versus a time when they spent money on themselves. The study concluded that, “ if money doesn’t make you happy then you probably aren’t spending it right. ” On the other hand, many argue that money does not bring long term happiness, but is a quick fix that results in more problems.
A survey of lottery winners, for example, confirmed that lottery winners do experience initial elation after winning, but very soon that general sense of happiness returns to about what it was before they won. The winners even became unhappier when they quit their jobs and experienced lost relationships and a loss of sense of meaning and accomplishment. This was the experience of one single mother from the United Kingdom who won millions in the lottery. She lost all of her winnings in two years after going on extravagant shopping sprees.
She now works as a maid to support her family and pay back debt that she owes. She stated, “My life is a shambles and hopefully now it (the money) has all gone, I can find some happiness. It brought me nothing but unhappiness. It ruined my life. ” A study conducted by the University of Illinois stated that more than 30 percent of the richest people in America were not as happy as the person who earned a modest income. Why? Because happiness is not defined by our bank accounts or the things we possess. Happiness is a quality or state of being. It is a product of what makes you feel fulfilled.
No outside source, including money, can give you that. Another study in Psychology and Economics by the National Academy of Science suggested that people are happier as their income rises but only to a certain level. The study stated that once they are comfortable, which is around $75,000 annually, the state of happiness levels off. Sonja Lyumbomirsky, a wealthy stock broker said, “Once you’ve reached a level of comfort and have had the opportunity to drink the finest wines, fly in a private jet, and watch the super bowl from a box seat, you ask yourself, what now?
Clearly, having money has not resulted in true happiness for her. One main reason that money is not the source of happiness is man’s inborn flaw of greed. As humans, we always want more. We may say, “if only I made $100,000. 00 a year”, and when we achieve that goal, we are no longer satisfied and our desire goes up. There is never enough. The world also defines our success buy what we have materially and financially. Many spend much of their time in life trying to “keep up with the Jones”, so to speak.
And by doing so, they often find themselves stressed out and unhappy because they are trying to impress people they don’t like, with money they don’t have, on things they really don’t need. Others believe that if they had more money, they could spend more time with their family or do things they really want to do. Studies show, however, that those who take on more responsibility or work to earn more money, actually have less time for family, relaxation and recreation. The 2002 Nobel Peace Prize winner, Kahneman PHD, found the following as a result of his research:
1) Increased income has a small effect on life satisfaction. ) The wealthier people are, the more intense negative emotions they experience. 3) When countries experience a sudden increase in income, there is not a corresponding increase in its citizens’ sense of well being. Kahneman’s study did not link wealth with greater happiness in any way. Another study showed that in 1972, 30 percent of Americans said they were very happy. At that time, the average American earned about $25,000. 00 annually of our national income. In 2004, 32 years later, the average American income had increased to $38,000. 0, however the percent of Americans who said they were happy had virtually unchanged. Not only was this true in America, it was also true in other countries such as Japan.
Japan was basically a developing country in 1958 but had grown to be one of the richest countries in the world after World War II. The study showed that its citizens level of happiness did not change as it economy grew from a poor country to a thriving nation. There are many views and opinions on whether money can buy happiness.
Most will agree, however, that having enough money to live comfortably will increase our level of happiness, but having an abundance of money does not make one happier than those who have less. Happiness is not defined by the size of our financial portfolio but by what makes us feel fulfilled. To some, having lots of money is their source of fulfillment, to others it isn’t satisfying. They find more happiness in the smaller things in life such as spending time with their family members and friends. Money has a little role to play in that regard.