Recently, I came across an article from several years ago about a study that shows that millionaires are happier than nonmillionaires.
“Oh, no,” I groaned to myself, “not another one of those studies seeking to establish a correlation between wealth and happiness.”
Obviously, many people are curious about the question of whether money increases one’s happiness. Were it otherwise, economists and sundry other scribblers wouldn’t continue to pose the question and offer their opinions (yes, opinions—not airtight conclusions) about it. From a personal standpoint, I find economists’ attempts to find a link between wealth and happiness to be unfair, misleading, and somewhat tawdry. From a professional standpoint as an economist, I find such studies to be a vain exercise because they presume to quantify the unquantifiable.
One of the perennial issues in economics over the past century and a half is the question of what can be quantified. Many economists emphasize quantitative analysis. “Quants” is the informal name for economists who try to reduce economic phenomena to numbers. Unarguably, there are areas in which data-gathering and number-crunching are appropriate. However, there are other areas of human life not subject to quantification, which I will get to momentarily.
A bit of the history of economic thought is pertinent here. In the early 1870s, three economic thinkers—William Stanley Jevons in England, Léon Walras in Switzerland, and Carl Menger in Austria—arrived independently at the breakthrough concept of marginal utility. The major flaw of the classical school of economics was that, despite its many useful insights, its scholars never arrived at a satisfactory theory of value. Imagine how askew biology would be if cells were improperly understood or chemistry without clarity about valences. The marginalists discerned that “value” is not a fixed quantity but is determined by how much an individual values, on the basis of utility and scarcity, the next unit of something in a specific context at a specific time; thus, value is not constant, but fluctuates.
The so-called marginal revolution spawned three neoclassical schools of economic thought. The Lausanne school of Walras adopted the most heavily mathematized methodology. Walras’s successor, Vilfredo Pareto, hypothesized that human happiness could be quantified. He even invented the term “util” as his proposed unit of happiness. As you can imagine, Pareto never succeeded in finding a universally acceptable definition of a util. It was impossible to say that A experienced 10 utils of happiness from a certain purchase while B only derived 8 1/2 utils from an identical purchase. Modern attempts to quantify happiness and measure it as a specific quantity of dollars, euros, or yen have proven just as unsuccessful as Pareto’s efforts to quantify happiness.
Apart from the epistemological and methodological challenges that economists face in trying to quantify happiness, simple observation and common sense lead to the conclusion that a subjective state of happiness cannot be equated to an objective quantity, such as $1 million. (I should mention here in passing that the subjectivity—the endless variety and uniqueness of individual human beings—became a fundamental premise in the Austrian school of economics. It led to Menger, its founder, articulating the subjective theory of value and endorsing methodological individualism.) OK, enough of that wonky stuff, let’s look at real human beings.
Human life, as you have undoubtedly noticed, is quite complex—far more than some simplistic notion that money is the key (or one of the keys) to happiness. The “money leads to happiness” hypothesis is grossly materialistic. It ignores intangibles, whether psychological or spiritual.
I defy anyone to refute the following: (1) There are people who are monetarily poor but quite happy (however you choose to define happiness—i.e., contented, joyful, cheerful, satisfied, fulfilled, at peace, and so forth). (2) Likewise, there are people who are rich but miserable.
Let’s briefly review (2) first. Few things are sadder than someone earning a huge income but hating their work so much that they drink themselves to sleep at night. Think of the dark poem, “Richard Cory” by E.A. Robinson that was turned into a haunting song by Simon and Garfunkel in the ’60s. The rich man killed himself. Tragedies like that really do happen when some affluent individual can’t find happiness.
I’ve known people for whom wealth has been a burden in other ways. Some spend more time worrying about managing, preserving, and/or increasing their wealth than they do in actually enjoying it. I’ve also known rich individuals who were anxious and insecure because they couldn’t tell whether people liked them for their money or for themselves.
On a happier note, regarding my assertion that one can simultaneously be both poor and happy, I can cite myself as an example. After graduating Phi Beta Kappa and attending the University of Michigan School of Law for a semester, I decided to switch gears and become an educator. I moved out West and found a job as a counselor in an inner-city high school for dropouts from the school district’s regular high schools. When the history teacher recognized early in the semester that I knew enough history to teach her classes, she arranged for a leave of absence for the next three months. The same thing happened with the math teacher.
So there I was, teaching math and history in addition to my counselor duties. My pay was a not-so-princely $2.10 per hour—the federal minimum wage at that time. The only way I could make ends meet was by holding down a second job. I got free room and board by taking care of a fellow Michigander who had graduated from college the same month I did, only to break his neck in an industrial accident five days after graduation, rendering him quadriplegic. (Good news! Bill is still hanging in there, more than 50 years on.) Although I was barely scraping by, I was as happy as I ever had been. However, the market was telling me that I needed to move on. The minimum wage then, as now, was insufficient for me to buy a house or start a family.
What made me (and, I’m sure, many others) so happy was the feeling that I was doing something worthwhile and making a difference in some young lives. Having a worthy purpose in life enhances one’s happiness. Do you think that Elon Musk is happy simply because he is worth billions? I think he is happy because he has enjoyed the blessings of liberty and used his freedom to tackle hugely challenging tasks, at which he has achieved considerable success. Big money can be satisfying if you know how to handle it, but in many cases, it is the feeling of accomplishing a lofty goal that results in the happiness of fulfillment.
We can also learn a valuable lesson about happiness by looking at the very old among us. The ones who are happy have found a purpose that inspires them to get up in the morning and carry on. The ones without a purpose tend to lapse into a dull, joyless existence. A large pool of savings by itself doesn’t guarantee happiness.
I haven’t even touched upon the factor we call “love.” There are countless cases of people at various stages of life who are just scraping by economically but are deeply happy because of the love they share with others. Conversely, there are rich, lonely people who are far from happy.
May you all find what brings you happiness. I predict that you will find it among the things that money can’t buy.
