The love of money, as they say, is the root of all evil. Yet money remains an essential commodity in everyday living. It is a universal need that is pursued one way or the other world over. There are several amenities in life that can mostly only be purchased by money; hence the lack of it can speedily reduce an individual, any individual into distress and a state of depression. Money is acquired by several means; for most people of certain ages, to acquire money means to simply work for it. For others of younger and even older ages, their acquisition of money is largely determined by others, such as parents, guardians in the case of younger people or the government, pension and previous investments in the case of the older generation. All in all, money is an essential part of living. It may not necessarily be the most important aspect in life as will be critically examined later on but it most certainly ranks very high indeed on the list. Some might argue that with enough money or adequate finances, every other aspect of life falls into perspective. Yet it may immediately be counter argued that the term ‘enough money or adequate finances’ is, in itself, a relative one. What constitutes adequate finances, when is a man said to have enough money? Perhaps it is worth mentioning at this juncture the economic theory of supply and demand and vice versa. The more you make, the more you need. Human need is such that can never be fully satisfied. For instance the needs and demands of a toddler differ significantly from that of a teenager as does that of a man in his 20s from that of a family man with children. Is it then possible to quantify one’s overall state of wellbeing by how much wealth the individual has been fortunate enough to acquire? Can money be said to possess the ability of buying or at the very least orchestrating happiness? What, in the first instance, is happiness? While it remains difficult to attribute a specific definition to hhappiness, it is often referred to as the state of well-being characterised by emotions ranging from contentment to intense joy or emotions experienced when in a state of well-being. The opposite of ‘happiness’ would therefore be ‘sadness’ or to be in a sober mood. Happiness is a robust state of mind that has been pursued by mankind since the stone ages and is as old as man himself. Man as a social being has goals and expectations in life. Such goals and expectations are quite naturally based on individual beliefs, societal or cultural norms as well as personal experiences. It is however safe to surmise that whatever a man’s ambitions, goals, expectations and desires, when these desires and expectations appear to be within easy grasp and ultimately achieved, he will naturally be in a state of well being and experience what is known as happiness. Some of the major contributory factors to happiness include but are by no means limited to the following:
Good or optimum state of health
Secured and well paid employment
Supportive family or friends
As pointed out above however, these factors are based on individual concepts of happiness and the means by which this state of mind can be achieved. From the factors above, it becomes increasingly visible that happiness can be analysed from the economic as well as psychological perspectives. According to economists, it is a standard assumption that happiness – individual utility in the economic vocabulary – depends on income, leisure and sometimes a few other factors. Yet, although mainstream models would predict that higher income leads to greater happiness, most earlier empirical research has been unable to find a sufficiently strong correlation between subjective well-being and per capita income in rich countries to support the standard utility assumption. In a research carried out in the 90s, it was discovered that even though many, if not all, African countries were classed as under developed societies where poverty assails most of the population, people were still happier than others of more substantial means in countries like the United Kingdom and the United States. In a country like Nigeria for instance, the term ‘depression’ was almost a strange expression for many while others who had heard of the world had never even come close to suffering such a low state of mind. Research on the other hand, shows that quite a significant number of patients in the UK suffer depression which is the exact opposite of happiness or a state of bliss and well being. The pursuit of happiness and all it entails has been a goal shared by people world over more than any other goal in the history of mankind. While economics might be associating the pursuit and ultimate capture, so to speak, of this rather elusive blissful state of mind with the accumulation of wealth and material satisfaction, it has been proven in recent times that this may not very well be the case. In fact, a positive association has been shown to hold only at certain points in time within particular countries and not for the group of high-income countries as a whole. The usual explanations given for this paradox are either that people compare themselves with their peers and neighbours or that as incomes increase, so do people’s income aspirations. Both these factors are assumed to be present already at fairly modest levels of per-capita income. However, one recurring problem with previous studies is that conclusions on the absence of an effect of economic performance on well-being have typically been based on either limited cross-sectional samples which may be contaminated by a strong time-constant cultural component or on sparse and incomplete longitudinal data. The unavoidable fact remains that with the accumulation of wealth or any other commodity for that matter, comes more responsibility or need which in turn leads to even more desire for greater accumulation. In that regard, it might be safe to surmise that perhaps wealth or its endless accumulation does not exactly guarantee happiness. For instance, if a man is said to have achieved his goal and been fortunate, lucky or smart enough to secure a fantastic job and comfortable income, if the economist approach on consumer behaviour is accurate, he should be in a blissful state of mind. However there are other factors which need to be considered to determine a man’s state of mind and this is where the psychological and social researches into happiness comes into play. In support of Duesenberry’s paradox, Kenneth Arrow believes that it offered “one of the most significant contributions of the postwar period to our understanding of economic behaviour” and that it was to be commended for attempting to link economic theory more directly with psychological motivations and with consumer learning processes. Some saw Duesenberry’s work as attempting to broaden the theoretical economist’s horizon. Others like A. C. Pigou, expressed serious methodological reservations but nonetheless commended the potential significance of the work. In more recent times, there has been a steadily increasing interest on the part of economists in happiness research. It has been argued that reported subjective well-being is a satisfactory empirical approximation to individual utility and that happiness research is able to contribute important insights for economics. It has also been reported how the economic variables such as income, unemployment and inflation affect happiness as well as how institutional factors, in particular the type of government; democracy or dictatorship and the extent of government decentralisation, systematically influence how satisfied individuals are with their life, the effects and some of the consequences for economic policy and for economic theory. Whereas psychologists and sociologists have been researching the concept of happiness for a very long time, the economist approach to happiness is actually a more recent approach. Early economists and philosophers, ranging from Aristotle, who promulgated that a happy life is a good complete life and concluded that although happiness is good other things are equally good and important; such things as health and wealth, knowledge and friendship, and a good moral character to Bentham, who formulated that “happiness is the greatest good” John Stuart Mill, an ardent supporter and disciple of Bentham who agreed that “…. actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness….” have all incorporated the pursuit of happiness in their work. Yet as economics grew more rigorous and quantitative, more parsimonious definitions of welfare took hold. Utility was taken to depend only on income as mediated by individual choices or preferences within a rational individual’s monetary budget constraint. Even within a more orthodox framework, focusing purely on income can miss key elements of welfare as numerous economists have noted over time. People have different preferences for material and non-material goods. They may choose a lower paying but more personally rewarding job, for example. The study of happiness or subjective well-being is part of a more general move in economics that challenges these narrow assumptions. Richard Easterlin was one of the first modern economists to re-visit the concept of happiness, beginning in the early 1970s.
In economic researches world over, when people are asked relevant questions about what for them constitutes happiness, the answers are mostly identical. For those who are currently struggling to make ends meet, those who are out of jobs, those who are classified as under priviledged in society by virtue of their meager or no income it would appear that the wide belief is that money can indeed buy happiness. But when probed further and deeper, it emerges that money on its own, may not necessarily bring happiness but mere momentary satisfaction. What money certainly does however is to relief people from their financial burdens. Where a family struggles to pay the rent/mortgage at the end of every month, bills accumulate from lack of adequate finances, holidays are a thing of the past or never experienced. If such a family is transported to a place where they can suddenly afford to consolidate their debts, pay off the mortgage, go on holidays, eat what and when they like, their spirits will certainly be lifted significantly higher than when they had little or nothing to exist on. It is therefore apt to surmise that money would most probably clear debts, reduce or out rightly pay off mortgages, which would certainly be a tremendous source of relief for most people. Money however may not necessarily have the ability to purchase true happiness. The human brain is trained to adapt to situations, good or bad. It is therefore only a matter of time before the new found wealth becomes a ‘given’ and the family is faced with other challenges. Many people, cross-section, agree that acquisition or possession of significantly more money than they have at the moment can calm their day to day frustrations and perhaps distract them from their personal problems, but it cannot make them truly happy. If an individual is basically positive and optimistic, the acquisition of wealth will only enhance that person’s life. It is believed that money can bring relief if the lack of it is causing stress (as is the case in the majority). If however, a person is generally neurotic, unhappy and pessimistic, no amount of money will eradicate such pessimism or other unrelated psychological problems the individual deals with on a daily basis. A windfall can also bring problems to people who have no idea how to deal with money. To those who have lived from hand to mouth all their lives, unless they are intelligent about it, there is a tendency to fritter a windfall away. One has to know how to use or invest money wisely, in order to make it work for them. In a survey carried out in England and America on lottery winners it became a clear pattern that people essentially remain who they basically were before winning the lottery. A pessimistic, uninspired individual who wins ?1,000,000 in lottery is more likely to be back to exactly the same spot he was in before winning the lottery in less than five years. While a more optimistic, ambitious and level headed individual who wins ?500,000 is more likely to go ahead and invest the money in ventures that will guarantee him better income for the foreseeable future. Money or shall we say too much money is itself a catalyst for trouble for those who are not psychologically balanced enough to handle instant wealth.
Economists and psychologists have come together in numerous attempts to untangle the webs of how, why and why-not of money and the general state of well being/welfare. Of particular importance, it would appear, is the aspect of why money is seen by many as unable to set right all that is wrong in their lives and by so doing guarantee them lasting happiness. Why is it that the more money one has, the more one aspires to acquire? In the popular words of an artist ‘..the more money you come across, the more problems you have’ The economics of happiness is an approach to assessing welfare which combines the techniques typically used by economists with those more commonly used by psychologists. It relies on surveys of the reported wellbeing of hundreds of thousands of individuals across countries and continents. Why is it that when one is finally able to possess those material things that appeared all so important in the absence of money and to basically achieve their dreams it only brings momentary joy? In attempting to answer these seemingly depressing questions, scholars of happiness have arrived at some insights that appear very useful and educational indeed. It has been commonly acknowledged and accepted that money can help find more happiness, so long as one knows just what to expect from it and does not have unrealistic expectations. Splashing out money on luxurious cars or even buying a private jet is not necessarily a means of utilising money to becoming happy. Research suggests that seeking the good life at a store is an expensive exercise in futility. It is essential to realise and understand where one has been going wrong in order to achieve a blissful state of mind. According to Richard Gelfond, co-chairman and CEO of Imax, being an achiever and rising out of poverty certainly brings happiness. Wealth therefore appears to play a bigger factor in being happy than most would like to admit. In surveys, people consistently give three reasons for their personal happiness: wealth, family and health. Being richer means being able to afford better health, however debatable an argument this is. For a terminally ill patient for instance, perhaps with the notorious HIV virus or the equally formidable cancer; wealth most certainly affords them better treatment and immediate access to the very best specialists in those fields as well as the very best medication. The patients are therefore guaranteed far more comfort in their sickness than the ordinary man on the street who depends on the state or government for his treatment. At the end of the day however, can one honestly assert that the affordability of better health care makes the former patient happier than the latter? Can either be truly happy simply because one has more money than the other? Does it not then depend on the individual’s outlook on their conditions? Would the wealthy not willingly give up their wealth to become healthy again? Strange and surprising as it might sound, it is not uncommon for the poorer man to come to better terms with his condition and find, if not downright happiness, some sort of peace in the terminal medical situation he finds himself than for his richer or wealthier counterpart. Professor Robert Shiller, a Professor of Economics at Yale University, in his argument for the advantages of having money is of the opinion that more money, in all likelihood, guarantees better relationships. This is open to extensive debate and arguments. The simple question thereafter arises, if money or wealth enables one to find better relationships, how come then that most celebrities, by far the best paid individuals in the world, find it, from time immemorial, practically impossible to be happy in their relationships and marriages? It is common knowledge that marriages and relationships in Hollywood or any other star studded part of the world, for that matter, are more often than not, a fleeting experience for the parties involved. Talking about celebrities and their wealth, if money does indeed procure happiness, why is it that the majority of celebrities have had at one time or the other alcohol problems, drug addiction issues, depression, suicidal tendencies and even in albeit admittedly fewer cases, death by over dose of one dangerous substance or the other? Surely if money brings happiness they, the celebrities with more money than most should be the happiest on earth. This is however evidently not the case. It stands to reason therefore that while money promotes a better sense of well being in some, better sense of achievement in others, contentment, the satisfaction that comes with the ability and affordability of luxury items o comfort, and even perhaps momentary happiness and joy in others, it is not the mere happenstance of such money or wealth in one’s life that procures happiness or any true sense of joy for the consumer. Tim Webber of the BBC’s Business Edition, in one of his editorials, ‘Why money doesn’t buy happiness’ quotes an African artist, Youssou N’Dour as follows… “… Forget money entirely”. Youssou N’Dour is reported as going on to say that there is plenty of happiness in Senegal, even though its people are not wealthy at all. “Just see the joy that music and entertainment can bring to the boys in the poorest parts of Dakar.” says Mr N’Dour. But he concedes that one thing was even better than the music and other elements that promote happiness in Senegal; the moment when Senegal beat France in the 2002 Football World Cup. Catherine Sanderson, a psychology professor at Amherst College expresses her opinion on the debate of economics approach to happiness by saying that human beings are never satisfied. It is standard consumer behavioural pattern. The more we have, the more we are likely to want. It is the inherent nature of man. Ms. Sanderson authoritatively asserts that we always think just that little bit more money will be the answer to all our problems and bring ultimate satisfaction. Indeed, it would appear that the more money one makes, the more one wants or continue to aspire to make. The more one has the less effective it is at bringing one joy. Little wonder it is therefore that this seeming paradox has long bedeviled economists. Another reputable scholar, Professor Dan Gilbert, psychology professor at Harvard University opines that “Once you get basic human needs met, a lot more money doesn’t make a lot more happiness,”. Regrettably, there is no easy way out of being unhappy; money is no short cut to happiness for a depressed person. Overcoming one’s emotions and teaching one’s self to be happy can be more difficult that earning more money or winning the lottery as explained above. In fact, according to Matthew Herper, if a person is handed $10, the pleasure centres of his brain lights up as if he were given food, sex or drugs. But that initial rush does not translate into long-term pleasure for most people. Surveys have found virtually the same level of happiness between the very rich individuals on the Forbes 400 and the Maasai herdsman of East Africa. Lottery winners return to their previous level of happiness after five years. Increases in income just do not seem to make people happier and most negative life experiences likewise have only a small impact on long-term satisfaction. Probably via media exposure or even in real life, at some point in time or another extremely rich, wealthy and famous people have been seen to be unhappier than one would expect them to be, given the amount of material benefits that they have. It is surprising that a large number of wealthy people do not seem to experience the happiness that one would expect goes with so much money and riches. A study conducted by the University of Illinois indicated that more than 30 percent of the richest people in America were not as happy as the person who earned a modest income. It is worth mentioning that more often than not, most of the sulking, miserable people one comes across in everyday life are rich people. This is obviously not due to the fact that these wealthy people are unable to afford three square meals, pay the mortgage, go on holiday or afford whatever luxurious item catches their fancy. Their misery is as a result of the fact that people generally seem to have more expectations from money. Money cannot buy anyone everything but in the minds of people who give up everything for money, it is difficult to accept, having acquired the wealth of their goal that they strove so hard to achieve partial success. This is not to negate the positive effects money has in the society and on one’s well being in particular. Yes, money most certainly is important to help one live life to the fullest and be able to experience the good things in life, not necessarily criminally expensive activities but such holidays, clothes, jewelries, and cars that become seemingly unreachable when one is void of the purchasing means. But at the same time, an increase in its inflow does not bring proportional happiness with it. As the age old saying goes…the grass will always (appear to) look greener on the other side. If ‘A’s’ income increases by $20,000, he is happy until he finds out his next door, perhaps less qualified neighbour’s income has increased by $60,000 and that the neighbour can now afford the car of A’s dreams without breaking the bank.
The economics of happiness does not purport to replace income-based measures of welfare, but instead to complement them with broader measures of well-being. These measures are based on the results of large-scale surveys, across countries and over time, of hundreds of thousands of individuals who are asked to assess their own welfare. The surveys provide information about the importance of a range of factors which affect wellbeing, including income but also others such as health, marital and employment status, and civic trust. The approach, which relies on expressed preferences rather than on revealed choices, is particularly well suited to answering questions in areas where a revealed preferences approach provides limited information. Indeed, it often uncovers discrepancies between expressed and revealed preferences. The latter cannot fully gauge the welfare effects of particular policies or institutional arrangements which individuals are powerless to change. Examples of these include the welfare effects of inequality, environmental degradation, and macroeconomic policies such as inflation and unemployment. In a recent happiness survey at the University of Colorado, it was established that actual involvement in doing things can bring more joy than having things. Gilovich and Leaf Van Boven, both of the University of Colorado conducted this survey by asking students what makes them happy, when and where. The students were also asked to ultimately decide if they were at the happiest when they were doing something as against when they were buying something. It emerged that man’s preoccupation with stuff obscures an important truth: that the things that do not last create the most lasting happiness. One reason may be that experiences tend to blossom and not diminish as they are recalled. “In your memory, you’re free to embellish and elaborate,” Gilovich admonished the students. “Your trip to Mexico may have been an endless parade of hassles punctuated by a few exquisite moments. But looking back on it, your brain can edit out the surly cabdrivers, remembering only the glorious sunsets. So next time you think that arranging a vacation is more trouble than it’s worth–or a cost you’d rather not shoulder–factor in the delayed impact.”
Economists have found out in the United States for instance that an increase in income does not necessarily automatically yield an equal increase in one’s level of happiness. In one of the several surveys conducted, it was discovered that going from earning less than $20,000 a year to making more than $50,000 admittedly makes the recipient twice as likely to be happy, yet the payoff for then surpassing $90,000 is slight. And while the rich are happier than the poor, the enormous rise in living standards over the past 50 years has not made Americans happier. Why? David Futrelle gave three reasons for this. According to him, we overestimate how much pleasure there is to be derived from having more. Humans are adaptable creatures, which has been a plus during assorted ice ages, plagues and wars. But, he argues, that is also why people are never all that satisfied for long when good fortune comes their way. While earning more makes people happy in the short term, we quickly adjust to the new wealth, status and everything that comes with it. Granted, there is bound to be a certain thrill and sense of achievement which comes with the first shiny and exotic car one buys from the increased income or new found wealth, splashing out on huge screen televisions and even spending money on family. But it is not long before all these become ‘normal’ and the consumer begins to want even more. It is when this insatiable appetite for more yields little or no result that man begins again to experience dissatisfaction and many people find themselves descending back to the very initial position they were in the first place; reverting to a state of running in place that economists call the ‘hedonic treadmill.’ The hedonic treadmill theory explains the popularly held observation that rich people are no happier than poor people, and that those with severe money problems are sometimes quite happy. The theory supports the argument that money does not buy happiness and that the pursuit of money as a way to reach this goal is futile. Good and bad fortunes may temporarily affect how happy a person is,but most people will end up back at their normal level of happiness.Buttressing Mr. Yarrow’s point on the same subject, John Lanchester also observed that following studies of data from all over the world, it is clear that, instead of getting happier as they become better off, people get stuck in a place where their expectations rise at the same pace as their incomes and the happiness they seek remains constantly just out of reach. Reference is here being made yet again to the hedonistic treadmill. Daniel Kahneman, the one time (2003) winner of Nobel Prize for economics is best known for his work on hedonic psychology. Kahneman opines that suddenly the big question is being asked by those who spent their lives on making and measuring money: what indeed is it all for when people are no happier than they were. Be all these as they may, the fact remains undisputable that money does matter in various ways. In England, for instance, people who are earning less than or around ?10,000 per annum are measurably, permanently happier when paid more. It matters when people of any income feel a drop from what they have become accustomed to. But above all, money makes people unhappy when they compare their own income with others’. Richer people are happier not by the simple virtue of the absolute size of their wealth, but because they have more than other people. But the wider the wealth gap, the worse it harms the rest. Rivalry in income makes those left behind more miserable that it confers extra happiness on the winners. This insatiable appetite for more will keep driving a man back to the car dealership or to the electronic gadget stores in search of better and bigger items for more satisfaction. According to Gilbert however, what is being mistaken for happiness and satisfaction at buying a new ‘toy’ is simply the feeling that comes on the day one actually buys the item in question. Once the initial razzmatazz fades away and the new Ferrari or even private jet no longer races the heart, man tends to draw the wrong conclusions. Instead of questioning the notion or erroneous, if honest, belief that happiness can be bought at the dealership, one often begins to question their choice of car. ‘Perhaps I would feel better with a Ford Mustang?’ This thought alone sparks a fresh burst of enthusiasm and hope for more happiness which simply leads to yet more disappointment once the new car is purchased and the racing heart also inevitably settles back to normal after a few days or weeks. Again this is what economists refer to as typical consumer behaviour. More often than not, this dissatisfaction with the material things that come with wealth is borne out of envy for others around us. Quite naturally, more money can and does lead to more stress. The big salary pulled in from a high-paying job may not necessarily procure much in the way of happiness, at least not much more than the individual is accustomed to. Some have even gone as far as saying if one is unable to find happiness in their current situation on a low income job; it is unlikely that such persons will ever be happy even in a high paying job. The whole idea is to cut one’s coat according to one’s size to afford flexibility, satisfaction and happiness because however low one’s income is, there are always people below the hierarchy of earnings. Just as however much one earns, there will always be people on the upper rung of the ladder of success. What more money can do however is to buy one a (more) spacious house in the suburbs. What immediately becomes a problem is the long trip to and from work, taking the children (if there are any) to school and commuting to social activities from the suburbs or the countryside. At the end of the day, it is only natural that the everyday commute, even if permissible initially, becomes a problem and however much one loves their job, becomes a burden and wears down the individual. As in the case of lack of continued satisfaction with ones purchases, compariso