Does money make you happy? It sure helps, but how much do you really need?
In 1974 Richard A. Easterlin wrote a chapter in the book Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz. He discovered that there is a positive correlation between income and happiness within a given country. In other countries, however, this relationship does not seem to exist, creating what appears to be a paradox. People who live in rich countries are not necessarily happier than people who live in poor countries.
How do you measure happiness?
Easterlin used a self-assessment that is widely used to measure people's happiness. People were first asked if they felt very happy, fairly happy, or not very happy. They were then asked - on a scale from one to ten - to rate their hopes and fears for the future and further questions followed. The happiness survey was carried out in several countries around the world and always in the respective national language. Without going into detail, the following cross-cultural focal points emerged: economic stability, health and family.
Increasing income, increasing happiness?
Easterlin's paradox has been questioned by Ruut Veenhoven and Michael Hagerty. They concluded that higher absolute income leads to higher happiness. It is correct that certain basic needs must be satisfied and that a certain minimum income is required for this. As soon as these are met and you reach the minimum income, the correlation between absolute income - as measured by GDP - and happiness levels off. Veenhoven argues that there is a logarithmic correlation between absolute income and happiness. Whatever the case, the positive effect of increasing income on happiness slows down as income increases; It seems that spending a lot more money doesn't make you much happier.
The relative income
In a way, you could say that luck is linked to "keeping up with the Joneses". This expression was first introduced in a comic of the same name by the cartoonist Arthur R. "Pop" Momand. Your happiness depends on how your income compares to the people around you. Easterling also pointed out that Karl Marx once quoted: “A house can be big or small; as long as the neighboring houses are also small, it meets all the social requirements for an apartment. But let a palace be built next to the house, and the house will shrink into a hut ”(Karl Marx - wage labor and capital). Easterlin describes this in his work as relative income. People compare their income to that of their neighbor and this will determine whether they feel they have enough or not. In addition, the reference value that people use in each country is linked to GDP.
The key to nationwide happiness
The important conclusion from the Easterlin Paradox is that governments shouldn't focus too much on the size of their GDP, but instead on the relative income inequalities within a country. New research by Shigehiro Oishi and Selin Kesebir of the University of Virginia and the London Business School shows that increasing GDP can lead to greater overall happiness when wealth is shared. Because of this, satisfaction has continued to rise in countries such as the Netherlands, Sweden and the United Kingdom.
So don't let yourself fall into the comparison trap. Your happiness doesn't depend on what you have. Think carefully about what you really need. The bigger house or better salary doesn't necessarily make you happier. It is better to focus on what you have than what you don't have.
Want more?
Do you want more food for thought? We have redesigned our monetary system to support our quality of life. We call it the sustainable monetary system. Would you like to know more about it? Discover the model!