In 1989, more than 200,000 college freshmen were asked about their life goals, and one goal stood out from the rest – to be well-off financially.
Money is of course valued for the access it provides to countless resources. But does it make us happy? Asks Matthew Lieberman in his book “Social – why our brains are wired to connect”.
He cites research by happiness researcher Ed Diener who looked at surveys of thousands of US adults who reported their subjective well-being and their income. there was a statistically significant relationship between how much a person earned and how happy they were, but it was extremely modest. individuals’ income explained only about 2 percent of the differences in happiness across the sample. And most of this relationship had to do with being below or above the poverty line. If you are below the poverty line, every additional $1000 you earn dramatically alters your well-being. But once the basic needs are met, increasing income only adds a little bit to well-being.
The Easterlin paradox was discovered by an economist in 1995 when he looked at data from 1946 to 1989 to isolate the relationship between income and well being. While income, after controlling for inflation, more than doubled during this time, and yet well-being did not increase at all. This result was also replicated in Japan.
Psychologists point out that humans have the tendency to adapt to new circumstances, whether they are good or bad, called hedonic adaptation. The famous example of this is where major lottery winners were contacted some time after winning, and reported being no happier than individuals from the same communities who had not won. Economists instead suggest a relative income argument suggesting that earning $50,000 a year in a neighbourhood where most people earn $30,000 a year could make us happier than earning $100,000 a year and having neighbours who earn $200,000 a year.
Robert Putnam, in the book “Bowling Alone”, offers another perspective: social. First, social factors substantially contribute to subjective well-being and life satisfaction. Second, in modern nations like the US, these social factors are in decline.
One study compared the impact of income and social connections on well-being and found that social factors had a more positive impact on well-being than income, once relative income effects were considered.
Lieberman cites these studies:
a) Volunteering was associated with greater well-being, and for people who volunteered at least once a week, the increase in their well-being was equivalent to the increase associated with moving from a $20,000 per annum salary to a $75,000 a year salary.
b) Across 100 countries, giving to charity is related to changes in well-being equivalent to the doubling of one’s salary.
c) Having a friend whom you see on most days, compared to not having such a friend, had the same impact on well-being as making an extra $100,000 a year. (See Gallup study)
d) Seeing your neighbour regularly is like making an extra $60,000
Building more “social” into our lives is very cost effective, having coffee with a friend, giving to a charity – it could significantly improve your life.
Why are we getting less social?
Lieberman puts across that materialism in our culture has been growing over time. This aspiration toward financial success for many of us has come at the cost of our social connections. We have limited time, and spending more time working means less time socialising. In 1965, only 45% of college freshmen listed being “very well-off financially” as a top life goal, At that point, “helping others’ and “raising a family” scored higher. But by 1989, being well-off was at the top of the list, with 75% endorsing it. Although more individuals endorse materialism as a positive life value, the less happy they are with their lives.