“People want to be happy, and all the other things they want are typically meant to be means to that end. Even when people forgo happiness in the moment—by dieting when they could be eating, or working late when they could be sleeping—they are usually doing so in order to increase its future yield. The dictionary tells us that to prefer is “to choose or want one thing rather than another because it would be more pleasant,” which is to say that the pursuit of happiness is built into the very definition of desire.”
How then does happiness relate to the matter of finance and money claiming control of our life. The basic link would seem obvious: if I have money, then I have greater control in my life than if I have no money and am dependent on other people for my welfare. While obvious, this link doesn’t always work. We need only go back to our opening quotation from Morgan Housel. Happiness is not necessarily to be found among those people who have money. In conjunction with his quote, Housel offers one control-based reason for the disconnect between happiness and money (“we’ve used our greater wealth to buy bigger and better stuff. But we’ve simultaneously given up more control over our time”). This exchange of time for money might hold true; however, Gilbert offers a more expansive portrait of money’s not too harmonious dance with happiness.
Never Enough: Declining Marginal Utilities
Like many psychologists, Gilbert (Gilbert, 2006, p. 239) offers a stage-based analysis of the relationship between money and happiness:
“Economists and psychologists have spent decades studying the relation between wealth and happiness, and they have generally concluded that wealth increases human happiness when it lifts people out of abject poverty and into the middle class but that it does little to increase happiness thereafter. Americans who earn $50,000 per year are much happier than those who earn $10,000 per year, but Americans who earn $5 million per year are not much happier than those who earn $100,000 per year. People who live in poor nations are much less happy than people who live in moderately wealthy nations, but people who live in moderately wealthy nations are not much less happy than people who live in extremely wealthy nations. Economists explain that wealth has “declining marginal utility,” which is a fancy way of saying that it hurts to be hungry, cold, sick, tired, and scared, but once you’ve bought your way out of these burdens, the rest of your money is an increasingly useless pile of paper.”
The accumulation of money, according to Gilbert, operates through a model of declining marginal utility. It should be noted that this model applies to many forms of addiction. As we acquire more money (consume more alcohol) , there is less of a “hit” from this acquisition; we need to acquire even greater amounts of money (consume more alcohol) to get a “hit”. Gilbert (Gilbert, 2006, p. 239) offers the following provocative observation:
So once we’ve earned as much money as we can actually enjoy, we quit working and enjoy it, right? Wrong. People in wealthy countries generally work long and hard to earn more money than they can ever derive pleasure from. This fact puzzles us less than it should.
