If money doesn't make us happy, why do we act as if it does?
AbstractResearch on income and subjective well-being shows that among the non-poor, increased income has little or no lasting impact on happiness. Yet the desire for more income remains a powerful motive among many people at all income levels. Is this simply because many people are misinformed and believe that higher incomes will make them happier, or are they motivated by something other than the pursuit of happiness? This paper argues for the latter. The paper begins by exploring this question, reviewing the literature on income and subjective well-being, and discussing of the role of utility in decision making. This paper then argues that three main factors lead us to value increased income even if it does not make us happier. First, happiness is just one value among many, and not the only conscious goal people set for themselves. Second, even when people are striving to maximize happiness, our tendency to overweight short-term payoffs leads us to overvalue the short-term rewards that income provides. Finally, I argue that our values-based decision making competes with other motivational systems and evolutionary drives. Three evolutionary desires are discussed: (1) to store resources, (2) to be sexually attractive, and (3) to manage our social relationships and our personal identity within those relationships. While all three motivations play a role in our desire for increased income, this paper argues that it is the third - the use of money and consumption as a social tool - that has the most important overall influence on our desire for increased income past the point where it ceases to increase personal happiness.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Psychology.
Volume (Year): 29 (2008)
Issue (Month): 4 (August)
Contact details of provider:
Web page: http://www.elsevier.com/locate/joep
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lea, Stephen E. G. & Webley, Paul & Walker, Catherine M., 1995. "Psychological factors in consumer debt: Money management, economic socialization, and credit use," Journal of Economic Psychology, Elsevier, vol. 16(4), pages 681-701, December.
- Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, 09.
- Bruno S. Frey & Alois Stutzer, 2001.
"What Can Economists Learn from Happiness Research?,"
CESifo Working Paper Series
503, CESifo Group Munich.
- Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
- Bruno S. Frey & Alois Stutzer, . "What can Economists Learn from Happiness Research?," IEW - Working Papers 080, Institute for Empirical Research in Economics - University of Zurich.
- Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur A. Stone, 2006. "Would You Be Happier If You Were Richer? A Focusing Illusion," Working Papers 77, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Tania Burchardt, 2005. "Are One Man’s Rags Another Man’s Riches? Identifying Adaptive Expectations using Panel Data," Social Indicators Research, Springer, vol. 74(1), pages 57-102, October.
- Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
- Oswald, A.J., 1997.
"Happiness and Economic Performance,"
18, Centre for Economic Performance & Institute of Economics.
- Oswald, Andrew, 1997. "Happiness and Economic Performance," The Warwick Economics Research Paper Series (TWERPS) 478, University of Warwick, Department of Economics.
- Alois Stutzer & Bruno S. Frey, 2004.
"Reported Subjective Well-Being: A Challenge for Economic Theory and Economic Policy,"
Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften,
Duncker & Humblot, Berlin, vol. 124(2), pages 191-231.
- Alois Stutzer & Bruno S. Frey, 2003. "Reported Subjective Well-Being: A Challenge for Economic Theory and Economic Policy," CREMA Working Paper Series 2003-07, Center for Research in Economics, Management and the Arts (CREMA).
- Babin, Barry J & Darden, William R & Griffin, Mitch, 1994. " Work and/or Fun: Measuring Hedonic and Utilitarian Shopping Value," Journal of Consumer Research, University of Chicago Press, vol. 20(4), pages 644-56, March.
- Frijters, Paul, 2000. "Do individuals try to maximize general satisfaction?," Journal of Economic Psychology, Elsevier, vol. 21(3), pages 281-304, June.
- Andrew Clark & Yannis Georgellis & Peter Sanfey, 1999.
"Scarring: The Psychological Impact of Past Unemployment,"
Studies in Economics
9903, Department of Economics, University of Kent.
- Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-41, May.
- Faber, Ronald J, et al, 1995. " Two Forms of Compulsive Consumption: Comorbidity of Compulsive Buying and Binge Eating," Journal of Consumer Research, University of Chicago Press, vol. 22(3), pages 296-304, December.
- Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
- Nicole Fuentes & Mariano Rojas, 2001. "Economic Theory and Subjective Well-being: Mexico," Social Indicators Research, Springer, vol. 53(3), pages 289-314, March.
- Richins, Marsha L, 1994. " Special Possessions and the Expression of Material Values," Journal of Consumer Research, University of Chicago Press, vol. 21(3), pages 522-33, December.
- Headey, Bruce & Muffels, Ruud & Wooden, Mark, 2004.
"Money Doesn’t Buy Happiness… Or Does It? A Reconsideration Based on the Combined Effects of Wealth, Income and Consumption,"
IZA Discussion Papers
1218, Institute for the Study of Labor (IZA).
- Bruce Headey & Ruud Muffels & Mark Wooden, 2004. "Money Doesn't Buy Happiness … or Does It? A Reconsideration Based on the Combined Effects of Wealth, Income and Consumption," Melbourne Institute Working Paper Series wp2004n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Chang-ming Hsieh, 2004. "Income and Financial Satisfaction among Older Adults in the United States," Social Indicators Research, Springer, vol. 66(3), pages 249-266, May.
- Belk, Russell W, 1985. " Materialism: Trait Aspects of Living in the Material World," Journal of Consumer Research, University of Chicago Press, vol. 12(3), pages 265-80, December.
- Richins, Marsha L & Dawson, Scott, 1992. " A Consumer Values Orientation for Materialism and Its Measurement: Scale Development and Validation," Journal of Consumer Research, University of Chicago Press, vol. 19(3), pages 303-16, December.
- Robert Cummins, 2000. "Personal Income and Subjective Well-being: A Review," Journal of Happiness Studies, Springer, vol. 1(2), pages 133-158, June.
- Eric J. Arnould & Craig J. Thompson, 2005. "Consumer Culture Theory (CCT): Twenty Years of Research," Journal of Consumer Research, University of Chicago Press, vol. 31(4), pages 868-882, 03.
- Stutzer, Alois, 2004.
"The role of income aspirations in individual happiness,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 54(1), pages 89-109, May.
- Alois Stutzer, . "The Role of Income Aspirations in Individual Happiness," IEW - Working Papers 124, Institute for Empirical Research in Economics - University of Zurich.
- Willem Saris, 2001. "The Relationship between Income and Satisfaction: The Effect of Measurement Error and Suppressor Variables," Social Indicators Research, Springer, vol. 53(2), pages 117-136, February.
- Joaquina Lever, 2004. "Poverty and Subjective Well-being in Mexico," Social Indicators Research, Springer, vol. 68(1), pages 1-33, August.
- Bentham, Jeremy, 1781. "An Introduction to the Principles of Morals and Legislation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number bentham1781.
- Hoch, Stephen J & Loewenstein, George F, 1991. " Time-Inconsistent Preferences and Consumer Self-Control," Journal of Consumer Research, University of Chicago Press, vol. 17(4), pages 492-507, March.
- Isilda Mara & Michael Landesmann, 2013.
"Do I stay because I am happy or am I happy because I stay? Life satisfaction in migration, and the decision to stay permanently, return and out-migrate,"
Norface Discussion Paper Series
2013008, Norface Research Programme on Migration, Department of Economics, University College London.
- Michael Landesmann & Isilda Mara, 2013. "Do I Stay because I am Happy or am I Happy because I Stay? Life Satisfaction in Migration, and the Decision to Stay Permanently, Return and Out-migrate," wiiw Working Papers 103, The Vienna Institute for International Economic Studies, wiiw.
- Mohanty, Madhu S. & Ullah, Aman, 2012. "Direct and indirect effects of happiness on wage: A simultaneous equations approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 143-152.
- Monica Guillen-Royo & Laura Camfield & Jackeline Velazco, 2013. "Universal and Local Reconciled: Exploring Satisfaction with Universal and Local Goals in Thailand and Bangladesh," Social Indicators Research, Springer, vol. 113(2), pages 627-645, September.
- Stefano Pace, 2013. "Does Religion Affect the Materialism of Consumers? An Empirical Investigation of Buddhist Ethics and the Resistance of the Self," Journal of Business Ethics, Springer, vol. 112(1), pages 25-46, January.
- Christian Schubert, 2014. "“Generalized Darwinism” and the quest for an evolutionary theory of policy-making," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 479-513, July.
- Grimani, Katerina, 2014. "Labor earnings and Psychological well-being: An Empirical Analysis," MPRA Paper 57098, University Library of Munich, Germany.
- Eugenio Figueroa B. & Roberto Pasten C., 2012. "Income and the pollution path: Update and extensions," Working Papers wp369, University of Chile, Department of Economics.
- Liselot Hudders & Mario Pandelaere, 2012. "The Silver Lining of Materialism: The Impact of Luxury Consumption on Subjective Well-Being," Journal of Happiness Studies, Springer, vol. 13(3), pages 411-437, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.