Friday, February 23, 2007

Income and Happiness

Michael Shermer, writing in Scientific American, notes that “keeping up with the neighbors” is alive and well:

Imagine you have a choice between earning $50,000 a year while other people make $25,000 or earning $100,000 a year while other people get $250,000. Prices of goods and services are the same. Which would you prefer? Surprisingly, studies show that the majority of people select the first option. As H. L. Mencken is said to have quipped, "A wealthy man is one who earns $100 a year more than his wife's sister's husband."


This seemingly illogical preference is just one of the puzzles that science is trying to solve about why happiness can be so elusive in today's world. Several recent books by researchers address the topic, but my skeptic's eye found a historian's long-view analysis to be ultimately the most enlightening.


Consider a paradox outlined by London School of Economics economist Richard Lay­ard in Happiness (Penguin, 2005), in which he shows that we are no happier even though average incomes have more than doubled since 1950 and "we have more food, more clothes, more cars, bigger houses, more central heating, more foreign holidays, a shorter working week, nicer work and, above all, better health." Once average annual income is above $20,000 a head, higher pay brings no greater happiness. Why? One, our genes account for roughly half of our predisposition to be happy or unhappy, and two, our wants are relative to what other people have, not to some absolute measure.

2 comments:

Rowan Manahan said...

Excellent! Michael, I suspect you will enjoy Alain de Botton's 'Status Anxiety' which expands brilliantly on this.

My mother defiantly buys lottery tickets saying, "If money doesn't bring me happiness, I can always give it back."

Michael Wade said...

Thanks, Rowan. I will check that out. I also like your mother's philosophy!