Can money buy happiness?

Money is extremely important for the poor. Satisfying basic needs definitely increases happiness.


Asad Zaman July 18, 2011

Across time and space and widely different cultures and religions, there is an amazing amount of consensus that the answer to this age-old question is an emphatic ‘No’. Early in the 20th century, some influential thinkers argued that even though greed for gold was bad — a ‘disgusting morbidity’ — it could be harnessed for a good end. Unchaining the powerful drives for accumulation of wealth would create wealth for the society as a whole, ultimately freeing man from all worldly worries. Keynes expressed this vision poetically: “We must pretend that fair is foul and foul is fair. Avarice and usury must be our gods for a while, for only they can lead us out of the tunnel of economic necessity.”

This vision of a ‘heaven on earth’ created by a fabulous increase in wealth, inspired two generations of followers. The hope was that once free of the necessity to toil for a living, men would become kind, generous and gentle. They would turn to higher pursuits of philosophy, arts, aesthetics, and sciences, and develop an advanced and sophisticated culture.

Things did not go according to plan. Samuelson, who was one of the most influential disciples of Keynes acknowledged that ‘great affluence has not brought about the slackening of economic ambition’. The contrast between what was promised and what actually occurred was so great that many different fields of research emerged to analyse the discord. One of the most important of these is called ‘happiness studies’.

A study by Richard Easterlin, a professor from the University of Southern California, led to the surprising conclusion that very large changes in material comforts had virtually no effect on life satisfaction, or ‘happiness’, across time and across cultures. Easterlin showed that, during the 20th century, people in the US enjoyed comforts available only to princes of a century ago. Similarly, the standards of living were dramatically different in the US and India around the middle of the 20th century. Nonetheless, piecing together evidence from a wide variety of different sources, he found virtually no difference in life satisfaction among these vastly different societies. This became known as the Easterlin Paradox: in the long-run, there is no relationship between the wealth of nations and happiness. This discovery has radical implications. If true, then all the collective efforts poured into achieving high growth rates have been wasted. About a quarter-century of intensive debate and research has led to some firm conclusions, which we summarise below:

Firstly, money is extremely important for the poor. Satisfying basic needs definitely increases happiness. On this basis alone, it would appear that increased wealth would lead to reduction in poverty, and hence, to increase in happiness. In an earlier column entitled “The vacuum cleaner effect”, I explained why this was not the case. The process of economic growth has increased inequality and poverty.

Secondly, beyond the level of basic needs, increases in wealth lead only to temporary increases in happiness. Long-run durable changes in happiness are strongly tied to friends, family, community, and old-fashioned social norms represented by trust, commitments, loyalties, and courtesy. Legitimisation of the pursuit of wealth has led to an erosion of these social norms. It is an urgent priority for us in Pakistan, to take these findings seriously into consideration, in setting priorities for national growth and development.





Published in The Express Tribune, July 19th, 2011.

COMMENTS (12)

Umaer Butt | 10 years ago | Reply

Media Mogul Robert Murdoch, recently acquitted in phone-hacking probe, lost $7bln in 2 weeks which took him almost 6 decades to make, his market credibility is been tarnished severely, and now all he is doing to secure his reputation in market, because he knew once he lost his credibility from the market investors would not follow him...building the credibility within the stakeholders is vital if your credibility is withhold fiat currency will follow you, which generate esteemed happiness.....

Salman | 10 years ago | Reply

YES!!! Money buys happiness and EVERYTHING else.

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